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Critical Corrections
August 24th, 2011 9:50 AM

Back in the news is the failing economy, federal debt ceilings, and high unemployment.  The economy is barely crawling along and the media is once again fueling fear into the hearts of consumers.

It is true that without economic growth, the large budget deficit and debt problems will continue to get worse.  Much of the federal government's revenue comes from people working and paying taxes.   But with the current high unemployment rate, not only are taxes not being collected through jobs, but even real estate and other taxes are not being paid because homeowners simply do not have the ability to do so.

One huge reason for our current economic struggles is that small businesses cannot get the funding they need from local banks.  Because of their small size, they cannot compete with larger companies such as IBM or Disney and issue bonds.  Their only options are to either use whatever capital they currently have or to secure a line of credit from a local bank.  But banks have been extra hard on any borrowers without an established name.  And the personal housing equity that many relied on in the past is now gone after the housing market crash.

If we are going to kick-start the economy, it is critical that our banks begin to adjust and correct some lending practices, so that small businesses can turn their ideas into business growth and create jobs.  Many of the larger businesses of today were started by entrepreneurs who were encouraged and supported with local funds.

Home price recovery is also critical in turning the economy in a positive direction.  People need to build equity in their homes to create the stability and confidence needed to begin spending once again.  The good news is that the declines appear to be largely over.  However, until we see some appreciation in home values, the economy is likely to remain stagnant.  Let's hope that we can turn that corner soon!


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Posted by Barbara Doeringer on August 24th, 2011 9:50 AMPost a Comment

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