The glass-half-full TV talking heads keep preaching that the economy is rebounding and will grow that much more if only businesses could get credit and confidence would improve.
However, the latest National Federation of Independent Business (NFIB) numbers confirm that times continue to be tough on main street, while D.C., Silicon Valley, and Wall Street boom.
The problem isn’t confidence. Entrepreneurs by nature are confident. Pessimistic entrepreneurs are hard to find. And bank funding isn’t the problem. According to the NFIB,
Overall, 92 percent reported that all their credit needs were met or that they were not interested in borrowing. Eight percent reported that not all of their credit needs were satisfied, and 49 percent said they did not want a loan.
One in four owners cite weak sales as their biggest problem, while higher input costs is a notable business concern, with one in ten citing this as their most serious business problem.
Capital spending remains weak, although as I mentioned in a blog yesterday, capital spending exceeds labor spending. This is despite interest rates that can’t be much lower.
According the NFIB report,
Only 5% of the owners view the current period as a good time to expand; of those who view it as a bad time to expand, 71% of those blame the weak economy, and 14% cite political uncertainty. The net percent of owners expecting better business conditions in six months was a negative 5%, 15 percentage points lower than January.
All of this after massive injections of liquidity from the Fed. But as Rothbard points out in What Has Government Done To Our Money,
Inflation, then, confers no general social benefit; instead, it redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race—to see who can get the new money earliest.
He goes on to explain,
Inflation has other disastrous effects. It distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes very difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations.
Wall Street and D.C. are getting the money first, and the beneficiaries are obvious.
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Just one point of contention: holders of LinkedIn stock excepted, things in Silicon Valley are not as rosy as they are in DC. For one thing, its housing market is still a disaster. For another, its biggest city is teetering on the edge of insolvency.
This is a great time to start or build a new business. Bankrupt and consumers experiencing foreclosures are awash in cash. And banks, well they are just happy to lend unsecured credit as it helps their balance sheets. And the increasing government spending on wars and welfare has got to put money in peoples pockets. Lets never forget the Federal Reserve who is busy devaluing money and using the graft to purchase economic assets like Treasure Bonds and Mortgage Backed Securities.
Not to mention an unpredictable regulatory environment.
I read a lot of businessmen complaining about demand. But what does econ 101 tell us about demand? If you want more business, lower your prices. Demand is weak because prices haven’t fallen enough to match the current level of wealth in the country. What do these business people want, someone to force the consumer to buy at gunpoint at the level of prices the businessman would like to have?
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