Pulling Out All the Stops

By Andrew Paparozzi
In October 8, 2008

A day after announcing the creation of a facility to purchase commercial paper, the Federal Reserve cut key interest rates by 50 basis points. More importantly the cut in rates was part of a concerted global effort with other central banks to inject liquidity into credit markets and send a clear message that they will not be sitting on the sidelines.

The $700/$800 billion (or whatever) rescue package recently enacted by Washington is going to take time to develop and implement. It has become quite evident to the Fed and Treasury that more immediate action is necessary to both unclog credit overall, not just among banks, and to restore some confidence to the financial system. More rate cuts and additional injections of liquidity seem likely. While the impact of these actions may not be overnight, it will be much more immediate than that of the rescue package. Will these actions prevent the economy from sliding into recession or an existing recession from deepening? It surely doesn’t seem like it. Individuals and companies are quite apprehensive, and rightly so. However, these and other actions can, and hopefully will, prevent a much uglier situation.

While the focus has been on housing, the mortgage mess, and mortgage-backed securities—so-called “toxic” assets—businesses, especially small businesses, are finding it tougher to get credit, if they can get any at all. Note that 90% of establishments in the commercial printing industry have fewer than 50 employees, close to 96% have fewer than 100 employees. See the industry profile in the upcoming NAPL State of the Industry Report, Seventh Edition. These establishments account for close to half of commercial printing industry sales. Difficulties with credit availability are not isolated but rather economy wide, and are impacting both businesses and individuals. The ripple effects will be felt for quite some time. But, as far-fetched and difficult as it may seem at the moment, try to keep this in mind: Although economic recovery may not be on anyone’s radar screen, it will at some point begin to make an appearance. Remain vigilant.

Andrew Paparozzi
Joseph Vincenzino
Kong Wang

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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