These are random notes on running your business during tough economic times.
1. We are in a depression. And it’s going to get worse. The cause of this depression is bad money. Money backed up by nothing at all. Many years ago, our money used to be backed up by gold. You could take your money to the bank and redeem it in gold. Most people didn’t because gold is somewhat cumbersome. Franklin D. Roosevelt was the “freckin” genius who began taking us off the gold standard. (He forbade Americans from owning gold.) Nixon finished the job in 1971. (He forbade foreign nations from exchanging dollars for gold.) Once we were completely off the gold standard the dollar printing presses were unstoppable.
2. Now, we don’t even print the money, we just create it with a computer keystroke. Again, with nothing to back it up… except trust.
3. You may have noticed over the last few year that more and more people don’t “trust” the government. And since government and big banks are in bed together, that “trust” in banks is fading too. Word is getting around that the FDIC is a little tight on cash these days. Those are the guys who “insure” your deposits. And now word is getting out that even major banks are cooking their books. You may have heard that banks are sitting on hoards of cash… yet… they are not “lending” it out. They’ve got boatloads full of money from the government bailout and stimulus efforts… but they are not so quick to loan it out. Why? Perhaps they are worried about another IndyMac Bank type bank run. In July of 2008 IndyMac woke up to federal regulators’ take over and customers lining up to withdraw their money. Alas, Indy is no longer with us.
4. What if a bank run were to happen tomorrow? Not just of one little west coast bank… but all over the country? Or, what if the government devalued the money overnight? Governments are famous for doing this. How would you conduct business? Bank runs are always followed by “bank holidays”. Yes, the governments who are responsible for a non-stable dollar will close the banks during a panic bank run. (ATM’s can run out of money FAST.)
5. If you knew a bank run were coming, would you pull your money out now? Would you stock up on inventory? Would you pre-pay vendors for things you know you’re going to need in six months? How would you pay your employees during an extended bank holiday? How would you take payment from customers who also suffer from a bank holiday?
6. The only way to run your business during a bank run, is to think and act TODAY.
7. Too much money printed and too much credit created out of thin air causes all kinds of bad investment and economic decisions. It was a bad decision to build so many houses in the housing bubble. (Some 15 million of houses stand empty and abandoned in our country right now.) Corrections of those bad decisions must come. It doesn’t take a soothsayer to see this trouble coming.
8. When bubbles pop… the ripples reach out seemingly forever.
Just thinking.
Linwood Austin
801-201-9026
