The Economy
A word from Mike Walker, Colonel USMC (retired)
All,
OK, so things are getting tough. Sorry, grew up a while ago and my first “American” instinct is to roll up my sleeves, tighten my belt, and get things going in the right direction.
That means I have a big heart plus a ready and helping hand for those who are in need but little or no sympathy for whiners, enablers, and “self-defined victims.” In other words, I am a progressive that puts a lot more faith in Ben Franklin who liked to quote Aesop than a far too cynical Saul Alinsky. “God helps those who help themselves” is my motto. That means I have no political friends.
Nonetheless, here is my gratuitous advice.
We got it wrong. By “we” I mean Democrats and Republicans, Wall Street and Elm Street, all the branches of government and the other cats and dogs to boot.
America needs jobs and jobs means focusing like a laser on small businesses.
We had our chance when it was an easy fix and blew it (was preaching this when George Bush was president in 2008 and have not changed my tune by one note). Now we need to do the best we can in the circumstances we are now facing.
Bush and Obama gave me a nice little tax break as a middle class American in the name of “stimulus” that cost hundreds of billions of dollars. Shame on both of them. Giving me a couple of hundred dollars is nice but those bucks gave me no ability whatsoever to create a job.
Now, based on some super-duper macroeconomic theory of trickle-up or trickle-down or trickle-on-your-pant-leg after too many beers this is supposed to create jobs. Bunk.
Focus like a laser on small businesses.
To be truthful, Uncle Sam is largely out of the game. I write that because the odds that the collective bureaucratic wits in DC will do everything in their power to create federal rules, guidelines and laws to help creating wealth for small businesses who then hire people is a bridge too far.
The DC crowd has a greater understanding of what it takes to put an astronaut on Mars than they do in removing barriers to small business wealth and job creation.
The ability to create jobs in the political realm now largely lies with state and local governments. The most important component is helping community banks extend responsible loans and lines of credit to small businesses.
That was the big failure of TARP. I supported TARP and still do but it was flawed. It was crippled by the myopic mind-set that overwhelmed the judgment of DC and Wall Street (the NY Fed, banks, and insurance firms behind all the CDS’s) when TARP was created in 2008. The lesson is that macroeconomic solutions will ultimately fail if you don’t address the underlying microeconomic issues.
In this case the underlying issue was helping community banks. When the national monetary policy is to set the Federal funds rate as close to 0% as possible you hurt the cash flow to Main Street. If you add the increased and prudent requirements for financial institutions to keep cash to cover the sour and reckless loans on their books from years ago you virtually starve small banks.
How can a community bank borrow cash to make loans when it can’t help but come in last in return on investment in a 0% world? They can’t and thus get far too little money from the big boys now desperate for higher returns. When Federal fund rate is at 0% no one in the depository system and beyond wants to loan money to the little banks that fund small businesses that drive job creation.
Even if the little banks tried to attract the money from the big boys by offering a higher return on the loan they would be committing suicide. Why? Because everyone would assume they are offering a better return on the loan because they are so desperate for cash that they MUST BE IN FINANCIAL TROUBLE. Kill them!
Thus, not enough money goes to community banks so small businesses are cash starved and hundreds of thousands of new jobs are never created.
To hell with the close-minded Keynesians from their perch atop Mount Olympus.
Regards,
Mike
