Gene Marks, a small business owner who writes a column on small business issues for the Washington Post, has been making weekly visits to the John Batchelor Show in recent months. It was Gene's careful drilling down into stats about small business that put him ahead of the federal government and White House hopeful Hillary Clinton's surprise discovery that small businesses, considered the backbone of the U.S. economy, hadn't been hiring. Readers of Gene's column and the audience for Batchelor's radio show were not surprised.
On Friday night Gene followed up his earlier warnings with mention of a Bank of America survey (via Market Watch), published April 30. The survey found that two-thirds of small businesses hadn't recovered from the Great Recession. He also reported to Batchelor's audience on additional bad news about the small business sector in the United States.
Here's the podcast of the discussion, which starts a few seconds after the 19 minute mark.
Not to lecture the Federal Reserve because it wouldn't do any good, but putting all one's eggs in one basket risks untoward results in the longer term, which Fed monetary policy since the onset of the recession has done.
I think I understand the rationale for the policy given that so much of U.S. savings is tied up in retirement accounts, which invest heavily in the stock market. But keeping the stock market roaring at all costs has translated to a dependence on the market that puts the retail investor and many small business owners in a precarious situation -- should anything that the Fed didn't foresee happen to the market.
Like the fledgling HK-Mainland "Connects" actually managing to coax a lot of scared Asian money out of the U.S. stock market and back to Asia. The Fed should know in that event, Petunia can't help. Treasury only unleashes Petunia in response to sneaky foreign central bank schemes against the U.S. dollar.
This new wrinkle in the Hong Kong stock market wouldn't be a currency play, and trying to lean on China's central bank wouldn't do any good, anyhow. I don't think Beijing likes the new "Connect" market, either. I think they're concerned that Hong Kong is already too uppity. But that's just the point; it might be an idea whose time has come. It might restore a little trust in Chinese companies that aren't half bad.
There are several "mights" in this scenario, but it serves as a warning that trying to control money in a highly integrated world is like trying to control all life.
With that reality in mind the Fed should transfer a few eggs to another basket, like telling the big U.S. banks it's okay to raise interest off the floor that they pay on individual savings accounts.
As I noted a couple years back when I pitched the idea for a 'wealth account,' there would have to be a number of stipulations for new account holders that usually aren't associated with individual savings accounts. This to prevent people from opening an account with $10 million they found in a trunk in their grandmother's attic.
But while the logistics of raising interest to a reasonably attractive level would be tiresome and expensive at the start -- that's why I suggested big banks do the groundwork by first offering a 'special' savings account -- it is spreading the risk for small investors in Wall Street. The psychological value alone would be money in the bank for everyone, including the Federal Reserve.
It would have many other benefits, including leveling the playing field for banks, which have to contend with credit unions. It was argued the credit unions deserved an advantage, but I see no way to make the argument stick anymore.
The biggest advantage of higher interest rates on individual savings accounts would be for small business owners, and pave the way for banks to take more chances in writing loans for small business owners.
That's very important, before the federal government makes things worse than it already has by trying to help the uh, downtrodden middle class.
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