I doubt the that difficult to get equity financing would affect the real economy. Maybe a wealth effect caused by declining stock prices (since many people are long beta for retirement in the US relative to other countries such as Germany and France) would lead to decreased consumption, but I think that has already taken place. Maybe wider corporate bond spreads would make it hard for firms to raise debt capital, but I doubt anyone would borrow during the Richard Koo balance sheet recession.

I just do not want any more bad news on the real economy although my parents would benefit from declining stock prices since they took my advice to open short positions on the S&P 500 in the first week in June when it was obviously overbought. I think equities need to fall more and offer large cash yields; to me they are overvalued compared to the “bubble” asset of treasuries. 10 Year Treasuries at 2% might be justifiable in a deflationary environment and was justified by the fundamentals, but the technicals do not justify that because the 2% coupon does not compensate for upward yield volatility. I suppose one reason why Japanese government bonds have low yields because the volatility on that asset class is low . (although the JGBs bubble popped in 2003 causing a large 100 basis point rise in interest rates)

If we can get through September reasonably well, then the weak recovery should be the most likely outcome.