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  • Is small business failure & pessimism a sign of proactive economic policy & strong economy? [Edit or Delete]1 comment
    Sep 6, 2011 5:39 PM
    I found this story to be hilarious because it's funny reading about how the liberals and libertarians complain about the economy being bad when my personal economy is still doing better than ever.  We're in a bifurcated economic boom with the big and rich getting bigger and richer, accruing limitless wealth and marketshare while the small & weak (unemployed, small biz) are ignored by policy makers.
     
    Optimism among small business owners, with less than 100 employees, remained flat at 48% in August after a sharp 20% downturn between June and July.
     
    "Historically the optimism numbers are 80-90%, of small business owners optimistic about the future," says Micahel Alter, CEO of SurePayroll. "By definition you do not start a small business unless you believe you can overcome tough odds, so to have this down in the 40s is about as low as it goes and is really as low as we've seen"
    Why does small biz suck and large cap rule?
     
    1. Uncompetitive borrowing rates for small biz versus large caps. 
    2. Bailouts and rescue programs for large caps and too big to fail. For example, General Electric Co. borrowed $16 billion through a Federal Reserve Board rescue program in the fall of 2008,
    3. Weak dollar fed policy and proliferate government spending for programs like homeland security, war, and infastructure that benefit large companies.LLL & CAT
    4. Globalization, free trade agreements great for S&P 500 companies 
    5. Price advantage. Discounters like Wallmart (WMT), Family Dollar (FDO) and Costco provide a much better value for cash-strapped, unconfident consumers than expensive mom & pop stores. Its common sense...why pay more for less? 
     
     
    Record level of small business failure and pessimism could be a symptom of preudent policy because it means policy makers are becoming more receptitive to the needs of too big to fail and multinationals- the real drivers of growth versus failure-prone small biz. The export boom lessens the role of small biz in the US economy. Weak dollar fed policy and free trade, for example, is a boon for S&P 500 which currently derives 40% (and growing) of its revenue from overseas. No need for small biz to participate when large caps are doing such a good job. It's more optimal user of capital to enrich the winners of the economy than waste time and money on the losers.
     
    Despite the widely held belief that congress is slow and ineffectual, policy makers are unwavering in their pursuit to create policy that is optimal for profits & earnings. That's why TARP and Iraq invasion sailed through congress. That means preemptive war to benefit defense companies, rate cuts and spending to get the dollar lower, bailouts for the banks, deregulation for wall st, and globalism for S&P 500 companies.
     
    That's why we'll keep having quarter after quarter of blowout S&P 500 profits & earnings despite main street being left out. Facebook, Twitter, Dropbox, and Groupon is where the growth is. Silicon Valley doing better than ever.  These web 2.0 companies have dominant marketshare, are taking advantage of globalization, and growing rapidly. Same for companies like BIDU AAPL IBM AMZN and NFLX which I keep recommending on this blog. 
     
    The cries for class warfare & 'buy America' protectionism from the left has been ignored since the Clinton asministration, and rightfully so. The free market dictates the big will rule. Congress is not stupid. They own stocks and they want to see the economy thrive. That is accomplished not by by throwing money after the bad, but by backing the winners. 
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    which is why we need to higher tax's on the rich which is why most people think we need to bring back those American values of which got us here in the first place
    14 Oct 2011, 05:31 AM Reply Like
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