There’s a lot of chatter about, not least in government circles, that banks are not lending to small and medium enterprises (SMEs) which are the main job creators in the British economy.

Banks are currently in an invidious position. They are being prodded to lend more, while simultaneously adding billions to their capital reserves. Non-expert ministers and MPs, such as Vince Cable, imagine that because a couple of banks received public money as a bailout, they are duty bound to risk yet more in a very uncertain marketplace.

What then are the facts for a bank like HSBC, one of the world’s largest:

So what are the facts? HSBC’s new small business lending was up 38 per cent in the first half; across all top banks and all small firms, the amount of new lending is down on 2009, at £520m per month, just enough to match repayments and defaults. Why? Demand for credit has dropped. Uncertainty means firms are trying to reduce their debt; small firms hold a record £56bn on deposit. HSBC’s corporate overdraft utilisation rate has fallen to 42 per cent, from 44 per cent: facilities are not being used. Rates are neither ultra-cheap nor extortionate: small corporate borrowers are not usually being priced out.

The supply of credit has also diminished. Banks have rightly become more realistic when assessing projects in a low-growth environment. Some lenders have quit the market. The remaining ones have been told to put more money aside (boosting capital), to shrink balance sheets, and to borrow less on the wholesale markets (a problem given that low saving rates have forced many banks to rely on money markets to fund new loans).

It’s not rocket science. Perhaps the Lib Dem contingent in the Coalition Government will have less to say on the matter in future.

Quote: City AM

The UK is fortunate that Tony Blair didn’t get his way on abolishing the pound.

Why? Morgan Kelly, Professor of Economics at University College Dublin, believes that Ireland — which did join the euro — is “no longer a sovereign nation in any meaningful sense of that term.”

Writing in the Irish Times, he says: “By next year Ireland will have run out of cash, and the terms of a formal bailout will have to be agreed. Our bill will be totted up and presented to us, along with terms for repayment. On these terms hangs our future as a nation. … Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.”

The country is thought to be close to losing its access to international debt markets. Jens Peter Soerensen, Chief Analyst at Danske Bank, a primary dealer in Irish government bonds, has said that “It’s close to a buyers’ strike at this point.”

Open Europe reports that EU Economic and Monetary Affairs Commissioner Olli Rehn will arrive in Dublin later today to hold meetings with Irish Finance Minister Brian Lenihan and the opposition parties to discuss the government’s proposed budget cuts for 2011.

Ireland’s already eye-watering austerity measures have seen the loss of 20% of its economy, while its banking sector remains mired in bad debt and inadequate capital resources.

Membership of the euro currency zone is hampering government efforts to deal with the crisis by preventing a devaluation, which would make exports more competitive in international markets.

A classic Irving Fisher debt-deflationary spiral is underway with tragic consequences for the Emerald Isle.

The UK’s Coalition Government has already signed up to a triple EU regulatory regime for the City of London. It would do well to hang onto as much autonomy as it can. If leaving the EU is not on the agenda, a refusal to be bossed about by Brussels is the next best option.

This article first appeared in our sister publication Devon & Cornwall Online.

Société Générale’s key strategist, Albert Edwards, has warned of an impending bloodbath in stock markets. October is a traditional month for share crashes.

He said: “Equity investors are in for a rude shock. The global economy is sliding back into recession and they are still not even aware that these events will trigger another leg down in valuations, the third major bear market since the equity valuation bubble burst.”

Edwards went on to say: “So far the equity market has shrugged off much of the weaker data that abounds, and has not joined the bond market in a perceptive move. The equity market will though crumble like the house of cards it is, when the [US] manufacturing ISM slides below 50 into recession territory in coming months.”

We are, he said, about to witness a “valuation nadir last seen in 1982.”

A dead-cat bounce appears to be underway in the US. Under the heading, “Refinancing avalanche threatens European banks,” Open Europe is reporting a €2trillion black hole in European banks. Nothing is going right on either side of the Atlantic. If you find yourself personally in trouble, try Quick loans.

The think tank says, “FT [Financial Times] Deutschland reports that there is a ‘€2,000 billion problem in European banks’. It notes that ‘the real stress test still has to come. Banks must refinance billions. A refinancing avalanche is coming their way’.” Personal refinancing is possible with payday loans.

As for America, the Telegraph’s Jeremy Warner writes on his blog: “… the IMF in its ‘selected issue paper’ on the US economy calculates that ‘closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.’ As Professor Kotlikoff notes, the entire Federal tax base amounts to 14.7 per cent of GDP, so to close the gap from a revenue perspective would require the authorities to double the rate of taxation in the US.”

There are also reports that the Fed has begun a second round of Quantitative Easing (QE, or printing money in the vernacular). Labelled QE2 or QE Lite, it’s thought to be preface a plumping up the Fed’s balance sheet from $1.2trillion to around $5tr in the near term.

Both the US and the eurozone appear to have intractable problems going into the medium term. The notorious “double-dip” seems ever more likely, but what chance of a new Great Depression?