Interest Rates Hit Lowest Rate in Decades; Still Economy Cripples

Let’s get one thing straight: interest rates are ridiculously low right now. As a matter of fact, the Fed warns about interest rates being so low for so long that it spurs inflation later on (as the demand for money will increase). The unemployment rate is also still rather high; and that graph linked is not seasonally adjusted. That’s still money being circulated into the economy however, just in the form of unemployment insurance.

So what does this conglomerate of data mean? People are reluctant to spend money. It’s no secret (and a sad one at that) that debt drives this economy. From the simple several-thousand dollar credit card bill at the average American household to the not-so-payable debt that the government racks up by the day. Debt is a method of transferring money to many different hands. Do I agree with a debt-based fractional reserve style economy? Well, no. But, that’s the way it’s set up and that’s what we have to deal with in the current time.

So, how do we deal with this?

The answer that needs to come from Washington is creating a business environment in which small business can prosper. Even Obama understands (or at least he claims he does) that small business still generates most of America’s jobs. If this is the case, why are we creating legislation that increases the cost of employing people and increases the difficulty of getting a loan? Why must the employer pay for a healthcare plan? Why do employees have to have a healthcare plan? My grandpa used to say, “If you don’t owe somebody something, you’re not going anywhere.” There is truth to that sentence. Generally, in order to expand a business; the owner needs to take out a loan. It’s nearly impossible to expand your business on profit alone. I then usually make a wisecrack after my dad quotes my grandpa; it usually goes something along the line of, “Well then, gramps would love the Obama administration, wouldn’t he?!” He recognized about 35-40 years ago that the Social Security program would go bust; since he figured out he could get back everything he poured in during his entire working life in seven years. He lived well over seven years passed the official retirement age. As to whether he factored in the Boomer generation or not will be a mystery (he probably did); but it is common knowledge now, and it will only be a matter of time before Social Security actually implodes. But, back to small business. In order for small business to succeed, there needs to be economic certainty. Interest rates need to be predictable, entitlement programs should take as little out of the paycheck as possible (because the employer has to match the amount the employee puts in) and money needs to flow, and not from the public sector to the private sector. This will provide economic stability.

The answer from the private sector is to spend money on more meaningful things. Are you eying the new iPod Touch 4th generation coming out? Well, I’ll be honest; I am. The thing is, electronics are not a good investment. Food for harder times ahead? A good investment. Tools for making or preserving your own food? A good investment. Tangible gold? Another good investment. Quit dumping money into the material lifestyle that was sold so well during the 80s. By dumping money into things that will prepare you for rougher times ahead you are doing two things; the first being putting money back into circulation and not keeping it in your account (or under the mattress). The second thing you do is help ensure your survival.