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Forum Post: How to make America great again

Posted 1 year ago on March 19, 2016, 8:38 a.m. EST by TonyWAWA (-20)
This content is user submitted and not an official statement

This might seem like a boring topic, but it is the most important thing you need to understand if you care about an economic recovery in the United States.

Big business loans are interest-only, meaning no principal reduction is required. The loans are based on LIBOR (which is referred to as a "benchmark rate"). The 1-month LIBOR rate is currently .44%. A big business typically pays a low spread over the LIBOR benchmark rate. For the purposes of this example we will use a spread of 1%. So, big business' interest rate is 1.44% and its loan payments are interest-only. When a big business borrows money to make a $1 million investment it only costs them $14,400 per year.

Small business loans - which are guaranteed by the US government - are based on the Prime (benchmark) rate and are fully-amortizing, typically over 5 years. The Prime rate is currently 3.5%. Small business pays a higher spread over the benchmark rate than big business (despite the loans being guaranteed by the US government). For the purposes of this example we will use a spread of 2%. So when a small business borrows money to make an investment it pays 5.5%, fully-amortizing over 5 years. The same $1 million investment costs that small business $229,212 per year, 16 times more than big business.

The debt constant (annual payment/loan amount) for a small business loan is 23%. So, in order for a small business to be able to borrow money it needs to find an opportunity that produces cash flow in excess of 23%, or else it will lose money for 5 years (and likely go bankrupt). There are very few opportunities like that in today's economy.

A big business only needs to find opportunities that produce cash flow in excess of 1.44%. Obviously, most existing investment and business opportunities qualify.

Moreover, US government-backed small business loans forbid small businesses from engaging in "financial" or "rent extracting" activities, which are the most stable and profitable businesses. There are also restrictions on small businesses engaging in international trade. Big business loans do not have any of these restrictions.

Big business is not smarter or more efficient than small business. They just have a lower cost of capital and a wider scope of available business activities. This is a result of big businesses' lobbyists influencing Congress to keep small business loans uncompetitive.

Given this dynamic, small business investment is near-impossible, and big business consolidation is inevitable. There are fewer and fewer companies cornering more and more markets. The result is the corporate oligarchy that exists in America today. There was an interesting statistic released recently. The US has fewer corporations than it had 40 years ago, despite there being three times as many citizens.

If corporations are people, do we just need more people?

The only way this is going to change is if the "people" lobby Congress to alter the terms of small business loans (which are governed by the Small Business Administration) to make them competitive with big business loans.

This inequality in the cost of capital is the cornerstone of the current corporate oligarchy. Small businesses are the backbone of America. Small businesses have created far more wealth and high-paying jobs for Americans than big business and the government combined. Today, small business is dying.

The only way to save the economic heart of the American economy is to change the lending inequality between small and big businesses. Otherwise, America will never become great again.

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8 Comments


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[-] 2 points by grapes (4989) 1 year ago

The inequality problem must be solved or else the abundant sunshine will not alleviate any ills. In fact, instead of oil wars we may get internal violence galore because the wealth problem may be exacerbated. Heaven and Hell are one and the same and here on Earth. Making it one or the other will depend on the biblical "filth in men's hearts" or "love in men's hearts."

[-] 3 points by ImNotMe (1488) 1 year ago

''Income Inequality In America'' - an absolute must see 6m 24s video ...

I append this shocking & yet massively viewed video to back up your point. Also...

fiat lux ...

[-] 1 points by grapes (4989) 1 year ago

I proposed a long-term solution to the wealth inequality problem. We can simply impose a 100% tax on any amount of inheritance to any individual or for-profit organization exceeding the inflation-indexed exemption amount of $600,000. There shall be no limit on the number of individuals or organizations receiving inheritance.

This will solve the problem of great inequality in a single generation and guard against the recurrence of the problem in the long term. $600,000 was picked to be enough to start just about any entrepreneurial endeavor and yet small enough that the inheritor cannot just quit being an active member of society and live off of the wealth.

[-] 1 points by ImNotMe (1488) 1 year ago

This is a good idea but that amount may need to be upped to $1m or something because $600k can be an average house in an averagely expensive city these days - mainly due to delusional & artificially, fiat money inflated real estate prices!!! More than the wealth and taxes on it of the 90-99% - we need to get to tight grips with The 0.01% Oligarch / Parasite Class, imo!! After all - it's those people & Banks & The US-MIC that are really calling the shots! Here's a wee video for you in hope of a Global Easter Rising in years to come ...

multum in parvo ...

[-] 1 points by ImNotMe (1488) 1 year ago

Don't Make America Hate Again!!! - and for some relevant (imo) links per this important OP...

fiat justitia ruat caelum ...

[-] 1 points by grapes (4989) 1 year ago

The U.S. needs to get energy independent. Reagan's having the solar panels removed from the White House's roof was a great publicity stunt for our idiotic people but it certainly stunted the renewable energy developments for decades and made the U.S. stay on the oil, oil, oil path to endless terrorism and war, war, wars galore. Well, what could we expect from a former Hollywood actor from the know-nothing party, eh?

Oil prices will be permanently capped due to the breakthrough in biodiesel generation research. The sun will provide abundant oil from high-efficiency algae once production has been scaled up. The world is awash in sunshine. Imagine greenhouses growing oil in the Sahara, Namib, Arabian, Mongolian, Arizona, and Mojave deserts. There is quite a bit of available renewable energy resource around if we can solve the problem of high water usage efficiency in the deserts. The deserts shall bloom green, there will be no more oil wars, and the tears of new mothers and fathers grieving of their deceased and crippled children from oil wars shall never roll down again from their cheeks. This is where America can and should lead - from science, service to all.

[-] 0 points by turbocharger (1756) 1 year ago

The lending issues are not nearly as hampering as the regulations.

Its an absolute regulatory mess out there. Most people have no clue. I run two small cos at this point, neither one very large. Its a nightmare. There are so many rules and they all cost money, its absolutely insane.

People say places like Texas and Florida are those crazy unregulated places. YA RIGHT!! You cant paint your neighbors house in Fl w/o gov permission, years of money and apprenticeships just to do property management, fees and taxes even if you make no money.

Its a nightmare in every industry. They have rigged the game so that the person that comes over with nothing but their shirt has zero opportunity to start their own thing.

And innovation is what drives humans, its whats brought us this far. They are crushing it.

Crushing it with regulations. Crushing it with this centralized educational nightmare in DC. Crushing it with their constant fear mongering. Crushing it however they can.

[-] 1 points by grapes (4989) 1 year ago

Regulations are what you see and fuss about as a small business owner but big businesses have the money to take care of all of these regulations' compliance. Why? They rigged the tax system so they can depreciate most means of production that they use.

There are company cars and company buildings. Have you seen cars with company advertising or logos on them? Have you seen buildings leased by companies even if they had the cash to buy them outright? They're for capturing tax benefits.

When were the average Joe and Jill able to claim depreciation of their houses, apartments, condominiums, cars, etc. on their income tax returns? I don't ever recall a time when depreciations were allowed for hoi polloi.

The companies complain about the U.S. highest corporate tax rates in the world but they are extremely escapable. That's why the market pays the financial tax compliance people so well, like Newtown's mass shooter Adam Lanza's father, - zero corporate tax for General Electric (which is not anomalous). Hoi polloi are slated for lifetime slavery and depreciation of their means of production, aside from aids to their go-nuts through SNAP, Obamacare, Medicaid, etc.

I can see from the top of the Empire State Building all around - North, South, East, West, and many of the busy activities. The ant people toil for the financial lords and ladies. There are inflationary holes drilled in all of their pockets, in their purses, under their mattresses hiding their cash, etc. There are depreciation disallowances for their greatest owned assets, their homes, their cars, their pants, their shoes, their foods, their drinks, their clothes, their toys, etc. so nature shall consume them through "consumption."

"For dust you are and to dust you shall return. In between, you shall toil for me and get f--ked again and again. For being motherf--kers and fatherf--kers, you shall rejoice, and I shall increase greatly your pleasure in conceiving children and your pains in childbirths, so your children, and your children's children shall be more numerous than the sand grains on all beaches, than all stars in heaven, than the drops of water in the oceans, so that they shall have depressed wages through NAFTA, H1B, WTO, TPP, and be yoked to lifetime slavery to serve unto eternity your and their only one true Lord, -- me," so says the Lord of Finance (who prohibits birth controls and abortions to increase the numbers greatly - the wages of copulations shall be depressed wages for all).