“Guess what people? The dreaded ‘c’ words are back! No, not that one, it’s the credit crunch,” exclaimed Anirban Basu, chief economist at some fancy trade association (you know the one) in an article published by The Times. Apparently, according to the Fed’s Survey of Consumer Expectations, more and more people are finding it harder to get credit than a year ago. The percentage of consumers indicating this rose to 58.2 percent in March, the highest it’s ever been since the survey started in 2013.

But hold on a minute, a credit crunch might not be all that bad. It means people are still hungry for borrowing, they’re just not getting enough of it. It’s like when you don’t eat all day, and then you can’t stop eating once you start. The real trouble is when people don’t want to borrow at all because they’re scared of what the future holds. That’s when monetary policy becomes as useless as trying to push a string – I mean, have you ever tried that? It’s impossible.

Unfortunately, it seems that the drop in loans and leases is partly due to weak demand. The New York Fed conducted a survey in February and found that the application rate for any type of credit over the previous year hit its lowest point since October 2020. It’s not like people are afraid of being rejected – the overall rejection rate actually decreased from 18.8% to 17.3% – so something else must be going on here.

Small businesses are struggling too. Unlike big companies, they rely heavily on bank loans, but only 2% of owners said their borrowing needs were completely satisfied in March. The National Federation of Independent Business did a survey and found that 29% of randomly selected members reported all their credit needs were met, while 59% said they weren’t even interested. Talk about rejection – they’re just not that into you, loans. Only 2% of businesses were even considering expansions, which is the lowest it’s been since March 2009. And if that doesn’t make you say “yikes!” then I don’t know what will.

The Federal Reserve, bless their hearts, are determined to get inflation to 2% annually, but making more credit available isn’t a top priority for them at the moment. Even if they did change their minds and start prioritizing growth, it might be too little too late. If there’s a lack of demand for loans, what can they even do? It’s like trying to sell snow to an Eskimo – it just doesn’t make sense.