>>until they do many businesses are completely frozen...<
I doubt this is the case. If a business is “frozen” out of the current credit markets it’s more likely because the current economic environment is so unfavorable to a lot of small businesses that they can’t get a bank officer to sign off on a loan. Just because a business needs money doesn’t mean it makes sense for a bank to lend it.
In fact, a lot of businesses are sitting on piles of cash. They just don’t want to invest in ventures that will run afoul of Obama and the Green Machine of regulation that he’s installed in DC since he took office.
One of the bigger problems a Republican President is going to face in 2012 is how to unwind everything the Fed has done to bank reserves at the same time the economy is starting to fly due to a reversal of most of Obama’s economic policies. We could see a monster inflation rate if it’s not handled properly.
It’s important to understand that with current money growth we should be experience significant economic growth, on the scale of 6-8% per year by now, especially coming out of a recession. The money is there. What’s missing is the will to expand among business owners large and small.
The stagnation is due to policies Obama has put in place, or threatens to put in place (EPA CO2 regs, ObamaCare, etc.) and not Fed policy. Fed policy has been extremely expansive, as indicated by the strong stock and bond markets, excessively low interest rates and surging commodity prices. None of that happens when the Fed is tight with money. Quite the opposite in fact.
My opinion is easy money from the Fed is what got us into this mess in the first place, going back to Greenspan’s low rates under Clinton. He raised them a bit on Bush at first but then lowered them right back down and the economy eventually overheated. Lots of that money has now left the country, along with many jobs, maybe to never be seen again. Giving out even more money at even lower rates to banks who are now just sitting on it hasn’t helped at all, things are actually worse than ever, and if inflation now hits hard most savings that are left are ruined too. Changing rates is far too blunt an instrument that is far overused. Leave it to banks that earned their money to decide how and when to lend, not up to those that simply print it, then we’d have far fewer of these ridiculous swings both up and down.