Recent data about small business confidence is reason for cautious optimism, and in reading the recent surveys, something has crystallized for me. The improvement in sentiment and thawing risk aversion at the grassroots level is directly attributable to the end of QE. It would seem counterintuitive that a rise in rates would be the key to growth, but I realize now that QE was not a growth initiative, but rather a stabilizing initiative. The Fed’s end game was to de-risk banks by keeping long term interest rates low and hence allow them to bolster reserves. The consequence of this was increased credit availability to long-term mega borrowers (e.g. Cisco’s recent $8B bond offering), yet decreased credit for short-term oriented small businesses. The unwinding of QE is allowing the credit seesaw to tilt to small businesses which are the key to growth, not Cisco. These are the first signs of a potential slingshot for the economy. In 18 months the fear mongers could very well be talking about runaway inflation, but for now the prospect of organic growth, job creation, and the end of price controls in the credit markets are cause for market purists to rejoice.