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A different sort of Jobs policy.

I own a small business.  And I can tell you that it's impossible to get credit, for any reason, other than secured.

I've asked at several banks at several times, and the answer is always the same.  If you own your own building, they will loan money IF you pledge your property as collateral.  No unsecured credit.  Period.  For anyone, for any reason.  Anywhere.

I'm fortunate that I've been able to tap private investors on a couple of occasions.  Both have been repaid in full, with interest, and on time.  I think I'm good credit risk.  My business continues to grow, and I'm current on all accounts.

But why would a bank lend to me, when they can lend the the US Govornment at zero risk, earning anywhere from a pittance to 4% if they want to commit for that long.  The govornment just has to much collateral (the entire country) and their ability to repay their loan is unlimited is well (the printing press).

Imagine, though, in a parallel universe, one in which the govornment balanced it's books.  Gone would be the zero risk trade with the Treasury.  Investors could invest in companies directly (venture capitol, stocks or bonds), or indirectly by investing in banks.  In order to profit, the banks would be required to lend to qualified businesses and individuals - the people who are starting or expanding businesses and employment opportunities.

Massive govornment debt acts as a massive brake on the economy by diverting capital from potential job creation to the purchase of govornment debt.  The debt burden has reached the point that banks seem to have concluded that no business is likely to be able to meet its obligations in the long term.

And they might just be right.



Disclosure: No positions