Maybe I said this already but nobody really reads this blog anyway so I can repeat myself if it makes me feel better.

We have a debt driven economy and that is the fundamental problem with the economy. Years ago a business would save money for hard times, they would draw from their savings during the hard times and pay back in during the good times. They might take a loan for a large expansion, but this would be a temporary arrangement or they might sell stock in the company to raise the revenue needed to expand. So, how did we get to the current position where companies have to sell “commercial paper” in order to make payroll. Shouldn’t a company have enough money on hand to pay their employees but according to the news reports many companies have to borrow money to pay their employees only to pay back the lender a short time later. Outside of the corporate environment we call these payday loans and they are generally considered to be negative forms of borrowing/lending. Unless you come into a windfall of money it is extremely difficult to reverse the cycle of borrowing money each payday because you never get your full pay, a larger portion of it goes to the lender each time and should an emergency come up you have to borrow more and you never catch up.

So, the question remains why do so many businesses operate in this fashion? If I were asking this question about an individual who is stuck in the payday loan trap I would probably say they needed to gain more education or skills so they could improve their situation. Perhaps this is the same of the businesses, they need to study up on a better business model, or change their business plan so they can improve their bottom line. I think there may be something else at play, but I don’t know enough about the legaleeze of the business world to be certain. Perhaps business who put money in savings are taxed to heavily on their profits. If they take out loans instead and pay interest they probably receive a tax deduction or credit instead of paying an extra tax for saving their “profit” and preparing for future hard times. If this is true it seems backwards to me.

A solution that works for businesses and individuals. Government should reward preparation and punish lack of it. How about a little tax incentive for saving some money?

One last thing. The government is a poor example. Some words used in last nights debate included surplus, deficit & debt. Clinton supposedly handed George Bush a large surplus, but he also passed on a large debt. Well was it a surplus or a debt? If you have debt, there should be not be a surplus in the budget. Extra money should go towards paying down the debt, but apparently that isn’t a line in the budget. Maybe the government should listen to Dave Ramsey. When asked who they might choose to head the federal reserve both candidates mentioned very successful business people. I think they should have mentioned Dave Ramsey, let’s curtail spending, pay down debt and save for hard times.