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Post by astrocash Thu Oct 27, 2011 6:57 pm

[color:82a0=#900]Bill Bonner
[color:82a0=#000]Why the US Economy is No Place for Small Business Growth

The Dow jumped 162 points yesterday. Up, down...up, down...when will
it stop?

Never. That’s what prices do. They go up and they go down.

<blockquote>Discovering...discovering...the markets will never cease
discovering...

And the end of all their discoveries will be, to return to the place
where they began, and to know it for the first time...</blockquote>

Poetry! Yes, dear reader, poets are probably better able to tell you
what is going on in the world than economists. Today’s economists
are tied to their worn-out, crack-pot theories. They won’t give them
up...even though they do not work.

Poets at least are on the right track...probing deep into the soft,
easily corrupted tissue of the human heart.

We’ll come back to that in a moment. First, we would like to tell
you why unemployment is so high. Yes, dear reader, the pieces of the
puzzle are coming together.

Why is unemployment so high?

Well, who creates jobs? Small businesses.

Big businesses cut jobs. That is how they maintain profit margins so
they can pay bonuses to their over-paid managers.

Small businesses...growing businesses...businesses that are adding
value and building wealth...create new jobs.

Why so few new jobs now? Because more and more money — capital
allocation decisions — are in the hands of the feds. The feds always
favor existing businesses...big businesses that make campaign
contributions and whose lobbyists take them to lunch. They never
favor small start-ups. The start-ups don’t have any money...or any
lobbyists. The start-ups have no political power.

The feds favor big businesses in direct, obvious ways — such as tax
credits, bailouts and government contracts. They also favor big
businesses by making it hard for the start-ups to compete with them.

Let’s just say, dear reader, that you wanted to start a new kind of
bank. You saw that the big banks are ripping off their
clients...losing money...and getting bailed out by the feds. So, you
figure you’ll do to the banks what Napster did to the music business
or Amazon did to the book business. After all, moving money around
is just an electronic, digital process. It should be dirt cheap to
run a bank. You could even create a much better way for customers to
hold their money. You could allow them to choose whatever currency
they would like...or they could hold their cash in gold...just with
a few clicks on a computer keyboard. You could set it up so no
customer would ever lose money...because his account would be backed
by, say, 100% physical gold. And you could cut credit card
transactions and banking fees down to a fraction of what they cost
today.

And you know what else? You could end inflation. And end the worry
about choosing currencies...or hedging against one currency or
another. You could create your own gold-backed currency!

Heck, it’s all information. A few computers. A few programmers. You
could revolutionize the banking business and send Bank of America
into bankruptcy even faster than it is going on its own.

Do you think you could do that, dear reader? Well, the answer is no.
You can’t. Because the regulators — put in place with the conniving
cooperation of the banking industry — would stop you. Otherwise,
some enterprising entrepreneur would have wreaked creative
destruction on the banking industry years ago. And the dinosaur
banks that remained would have been wiped out in the crisis of ’07-
’09.

Instead, the feds came to the rescue of the big banks. The start-ups
were shut down by the regulators. And the new jobs never happened.

That’s just banking...an obvious example. But in every industry the
story is about the same. Existing businesses colluded with the feds
to set up barriers to entry and to absorb savings, which could
otherwise be used to start small businesses. The US government runs
a deficit that is greater than the total savings of the nation. It
decides where these resources go. And one place they never go is to
businesses that haven’t been created yet.

Government always favors the past. It is always reactionary. It is
always backward looking...trying to protect industries that were
developed a long time ago. It always tends toward “zombieism,” in
other words...

Many dear readers probably thought our focus on ‘zombies’ was a
joke. But we’re as serious as we are about anything. And the more we
look at what is going on in the US economy, the more convinced we
are that zombies are behind it.

Zombieism refers to a tendency of things to become paralyzed and
parasitic. When anything ages it becomes less adaptable, less
flexible, more ‘stuck in its ways.’

You know the expression: ‘You can’t teach an old dog new tricks.’

That’s partly because the old dog is tired and doesn’t want to learn
any new tricks. And it’s partly because he doesn’t need to. Old dogs
just lie around. They eat, but they don’t hunt. Their joints are
stiff. Their ambitions are few. They’ve figured out how to get the
bone without much effort.

Likewise, old people often distrust anything new. They’ve seen that
most new things don’t work out very well.

And they often become parasitic. They eat. But they don’t produce.
It’s just natural. Often, old people mimic the grave before crawling
into it. They don’t move. They don’t think. They shuffle
around...like zombies.

Now, magnify these natural tendencies onto a whole economy, a whole
society, a whole nation. The US has been in business for nearly 250
years. Is it any wonder it is a little fusty?

But today, instead of explaining the General Theory of Zombieism in
detail, we are going to begin by asking you some questions, dear
reader.

How come university tuition rose more than 8% last year, when most
prices rose only half as much?

How come so few new jobs are created...in a society where so many
intelligent, well-educated people are looking for work?

How come health care costs go up year after year — like education
expenses — at twice the rate of the CPI...and people are no
healthier?

How come the government now consumes more than $41 out of every $100
of national output...making it by far the largest allocator of
capital in the world — when it is supposed to be a free enterprise
system?

How come the US government — which is supposed to be the best system
that 300 million smart people can come up with — is actually a
system that no sane person could possibly want?

All those questions have the same answer. The whole system has
become zombified...taken over by unproductive, parasitic tendencies.

By Bill Bonner

astrocash
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