Sunday, November 13, 2011
The Uncertainty Principle
For months now the Republican Party has been pounding the table with their collective shoe and shouting that the reason we aren't creating jobs is that business leaders are uncertain about the future. Together they are trying to point to a perceived lack of confidence to invest in new jobs. It has been a major talking point (to quote Herman Cain, "I don't have facts to back this up...") for so long surely we must all believe it. Once I learned that big business was sitting on $2 trillion in cash reserves I had doubts about this talking point but needed a logic to go with that. I mean, withholding that much cash from the economy was bound to have a consequence or two. To not circulate is a decision that a central bank might do to slow an economy and $2T is an amount to contemplate for such a move. So what was driving this decision?
It turns out that individuals have indeed bought into the scare tactic by the Republicans. Further withholding cash from the system. It is, in part, what keeps credit from the system. When individuals keep cash as deposits in a checking account the banks do not have long term money to lend. Sure enough, if you compound the big business decision to sit on cash and combine it with cash being held off shore (another $2T) because big business doesn't want to be taxed on it if they bring it home in addition to individual decisions to keep to cash (about $350B) more accessible you take the wind out of the sails of the economy.
Where the money went.
With the Republicans acting to stop government stimulus spending at all cost it seems we have a perfect storm to keep us in a repressed state. The party of, "NO!" has brought about what a central bank would have a tough time undoing. It is no accident that big biz is sitting on the cash and it is not uncertainty that is driving it. Supply-siders have had it all wrong for 30 plus years but as a talking point tool they have found a way to keep the middle class down through this perfect storm.
To reignite the country we need to spend; we can't spend what we don't have the confidence to spend. The uncertainty is with the smallest group, consumers. Not big Biz. Concern for having jobs has driven a large part of this connundrum. As well it should... we are extremely vulnerable to a more serious crash.
Moving cash from the banks to credit unions has the effect of keeping local control on the money. We still need that cash to be partially in savings accounts at the CU's to give the cash for the CU's to lend but with local control there is a stronger likelihood that the much needed stimulus will find its way into our economy... and not fall under the influence of the GOtPers saying, "NO!" all the time.