Inflation continues to cause liquidity issues all over the world, but sometimes not how you might expect.
The usual impact is rising prices affecting manufacturing costs feeding through to dampen consumer demand. That is continuing to happen and now central bankers are using the term “sticky” to describe the inflationary trend. That’s a strong hint that inflation is not going away any time soon.
Many banks now have unrealised losses to manage. This won’t be a problem for banks unless they need to sell these bonds to cover short term cash positions. This is what happened at SVB in California.
To mitigate their risk, even healthy banks are now quietly retrenching in case they suffer the same problem. This is severely limiting many companies access to credit and the problem will last as long as inflation remains an issue. Another great reason for us to help these companies reduce working capital.
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"To mitigate their risk, even healthy banks are now quietly retrenching in case they suffer the impact of inflation. This is severely limiting many companies access to credit and the problem will last as long as inflation remains an issue. These liquidity issues are another great reason for us to help these companies reduce working capital."