By Brandon Smith - October 8, 2021
The past 18 months have not been kind to small businesses. If you were unfortunate enough to live in a blue state during the onset of the covid lockdowns and you own a brick-and-mortar business then you have probably spent a large part of that 18 months closed, or struggling to stay open with a skeleton crew of employees. If you did manage to get a PPP loan from the government during shutdown you are now realizing that the 24-week grace period is running out and you will probably have to pay most if not all of that money back soon. Many who tried to get a PPP loan failed because the money was quickly chewed up by major corporations instead of being reserved for small businesses.
And this isnít even the beginning of the list of troubles for small companies. I have to say, unless a large part of your business is handled online your chances of staying solvent are slim. This is not the fault of most business owners, though, it is a consequence of artificially created conditions and restrictions.
What do I mean by this? Well letís look at some factors that many people might not be aware ofÖ
Hereís why small businesses are suffering
For example, both state and federal governments have been offering some level of covid unemployment stimulus. In the case of federal programs this could amount to $300 extra a week on top of a personís existing unemployment checks, even more if their state has a separate program. This has created a massive drought in the employee pool. No one wants to work when they can stay home, do nothing and make more money than they ever were before the pandemic. The reality is that there are jobs everywhere right now, but almost no one is applying.
This has led to major corporations and retailers offering unheard of sign-on bonuses in the range of $300 to $500. Some companies are offering to pay people just to put in an application. Many are offering incredible wage increases in the range of $15 an hour for unskilled labor.
But guess who canít make offers like that? The majority of small businesses. Large corporate chains have enjoyed endless stimulus packages from the federal government and the central bank and as long as this continues they will always be able to outbid small businesses for employees. And though the federal covid checks are slowly winding down, there are still millions of people receiving regular unemployment for many months to come. In a bizarre twist, the jobless are now flush with cash and are in no hurry to rejoin the workforce. Small companies simply cannot compete and lure these workers from their covid vacations.
On top of this, we are now witnessing a dynamic which I have been warning would happen for years now Ė a stagflationary grind. Thatís right, the debate that has been raging for a decade among alternative economists is finally over: Itís not a deflationary depression or a Weimar-style hyperinflationary collapse that is bringing America down, but a crippling stagflationary malaise. This means that U.S. GDP will continue to decline and certain sectors of the economy will continue to decline while prices on many products (primarily necessities) will continue to increase or remain very high.
This creates a conundrum for small business owners Ė Their overhead is rising and this is shrinking their profit margins. But, if they raise prices it makes it even harder to compete with large corporations that are able to keep prices lower for longer because they have government stimulus backing them up. So, not only are brick and mortar businesses unable to compete for employees, they also canít compete in terms of prices as the cost of materials and goods spikes. Itís inevitable, they will have to close down. There were over 200,000 extra small business closures in the past year alone due to covid and the lockdowns.
With small businesses being hit with a perfect storm leading to mass closures, the end result will be that only major corporations will be left to offer services in the near future, and Iíve been wondering for the past several months now if this is not part of the planÖ
Re-engineering the Great Depression
I am reminded of the situation that took place during the Great Depression involving small banks. In the 1920s there were thousands of small town and county banks across the country that were unaffiliated with major banks like J.P. Morgan or Chase National. It might sound strange to hear it but before the Depression many banks used to be small mom and pop businesses. By the end of the 1930s over 9000 small banks had failed, and the primary beneficiaries were the major corporate banks that absorbed all the assets into their portfolios for pennies on the dollar.
In other words, the banking industry and the massive power it holds today was consolidated in the wake of the economic collapse of the 1930s, and nothing was ever the same again . . .