Blind faith in capitalism

Discussion in 'Economics' started by jlryan87, Nov 12, 2011.

  1. Of course I addressed the topic. You did see the word "capitalism" in my post didn't you? I responded to your post to point out the fact that while this ideal of "pure" capitalism is a noble cause, what we currently have is largely crony capitalism. I even suggested a few recent examples from this Administrations support for "green" projects which receive well below market rates for funding (no matter the likelihood of profitability).
     
    #21     Nov 16, 2011
  2. I don't understand the system that you are proposing. But from what I gather:
    1. The government makes loans through the fed. There is no profit motive so the Fed will lend money to anyone who can vote (politicians strong arming the fed).
    2. When the loans go sour the government will RAISE corporate taxes to pay for the loans.
    3. private lenders are welcome to compete with the government, but the government has no profit motive and can lend at zero. There is no incentive for the government to lend at a higher rate because if there is a shortfall they can raise taxes. But at a lower rate, they can get more votes now.

    How will your system work any other way?
     
    #22     Nov 16, 2011
  3. #23     Nov 16, 2011
  4. jlryan87

    jlryan87

    Public lending is criteria based. If you fulfilled the criteria of sound business plan, then you will get funding. Lending is made at market rate, just like private lending, and is only applicable for certain entities/people. It is for the little guys who want to be entrepreneurial but do not have the collateral to back up a traditional loan. The rest of the folks who can qualified for traditional loans from private lending will not be eligible for public lending. The key point is that public lending is not made to quash the private lenders.

    As I have repeatedly said, failed ventures with the help from public lending would have contributed to the earnings of businesses that are funded from both public or private lending. The money didn't gone missing. Any increase in corporate taxation rate will have the most minimal effect on the health of corporations in general. In addition, since most public lending will be done to service the little guys, the amount of bad loans will be minimal compared to the healthy loans of the economy as a whole.

    Public lending is not competing with private lending, but competition can happen the other way round. There's such thing as unsecured loans from private lending. As for government meddling with the criteria for public lending to get votes, I happen to think that this is still better than welfare and whatever nonsense that can equally bankrupt the country. At least government funded entrepreneurship is more productive than generous welfare and student loans that benefit educational institutions more than the students.

    If public lending is implemented, it will beat unemployment to the pulp.

    Update: Public lending will generally have a market rate that is about the rate you can get from secured private lending. The rate for public lending starts off by mirroring the market rate. If demand for public lending gets too high, the cost of public borrowing will get higher than the market rate in the private lending sector. I am also suggesting a different and dynamic corporate taxation rate for public funded companies.
     
    #24     Nov 16, 2011
  5. I don't understand the comment about how wealth isn't destroyed. It absolutely is. It is also created when businesses succeed. I also don't understand the whole corporate tax rate thing.

    The government already has programs in place to provide small business lending. They do this to further a social agenda (minorities and women) or a politcal one (environmental or energy). In these, just like in private lending, unfortunately a lot more is required than just a sound business plan. Solyndra is a good example.

    I agree with you that the government should be encouraging small business development. This is where real growth and employment can be generated.

    But the reality is that no matter what system is set up, the best business plan (if there is such a thing) will not always get funding. There are many other factors that are always at play - often the confidence that YOU are able to do the plan.

    The system isn't as broken as everyone thinks it is. If you have a sound internet idea, and you have a reasonable background (making you qualified to execute your idea) I bet you could get 500k of funding relatively easily. You would have to give up equity, but nothing comes for free.
     
    #25     Nov 17, 2011