Ross Snyder

Credit Crisis Watch: Signs of Progress?

Even if the credit thaw plays out positively, the velocity of money has slowed down so much that permanent damage will continue to occur for more than a year.

Entire industry sectors are unable to secure financing. Nonprofits are locked out of the credit market. Capital spending freezes are not just institutional - they're industry standard.

Deflation should be enormous for a year or so. Raw materials are sitting in harbors unbought - their production prices far exceed their spot prices. Whoever owns that deadweight midstream in supply channels will be dumping not at fire-sale prices, but at fire-storm prices.

I think world economies are in trouble for years to come, no matter when credit markets thaw. Especially as industries heat up one-by-one (it will take quarters and years for these frozen sectors to spend again), there will be too much quantity of money chasing too few assets. By the time more industries heat up, the inflationary damage will have been done.

The banks should be the first players to thaw. Where they put their money should start the inflationary pressures. Will they be believers and unleash credit, or will they shut down for doomsday and boost gold reserves?