Re-Creating the American Dream — Forget the Baloney!

I see signs in the market and the economy that are not good — my 20 years experience on Wall Street tells me so. And I see people all around me scratching away at part-time jobs at the local gas station/mini-mart/etc. I see people scheming to get into social service programs that will pay them something … anything. How many do you know who are living in rooms in their parents’ homes or someone’s garage – just to survive until they can get jobs? So many many people are suffering in this economy, waiting for things to get better as they always did in the past, and wondering why it isn’t happening now. If this isn’t you, then you know these people. Plenty of them.

So, I decided it was time for a little tough love. Time to tell it like it really is …

Today I got another emailed note and, frankly weak resume, from someone who had found me on the Internet. It said: “I have been following your career for several years. You are a most impressive woman and I would love to have the chance to work with you. In fact, I would even consider a starting salary of as low as $150,000 just to learn what you know and …”

Delete!

I’m getting tired of these experiences. The economy is stagnating at a low level of Main Street activity, storefronts are empty, people are living like refugees or sponging off Mom and Dad, and the guy who will stoop to working for $150,000 annual salary has probably been out of work for five years. I was at a popular startup networking event downtown a few weeks ago looking for sharp-thinking entrepreneurs that might be worthy of an introduction to my venture investors. After getting pod-people reactions from pod after pod, I hadn’t met even one likely candidate. The place was full of suavely scruffy job seekers, including one who was far too important to tell me what specialty of computer science he had studied. He grudgingly informed me that I wouldn’t understand.

Get real.

Perhaps you don’t know why your life is so miserable. You’re working at a low-pay job, or two, or three.

Perhaps you can’t even get a job as a barista.

Let me just tell you what real life is like. Not everyone gets to play on the team, and little trophies aren’t given out at the end of a losing season. Life is not graded on the basis of smiley faces and frownie faces, in fact, throughout most of your life the only way you will know if you are doing it right is when you can pay for your own lifestyle with the money you earned yourself – and even then, there are no guarantees. Life is not politically correct and you occasionally face disappointment.

You might never be anything more than you are now.

Even if you are employed, how comfortable are you that you won’t walk in one morning and find out it is your last day? How much money have you saved? How long have you been whittling away at your credit card limits?

The stock market has had a heck of a ride to the stratosphere, but the money that is in the stock market isn’t on Main St. helping the economy. Margin borrowing is at record highs. Read this: http://www.marketwatch.com/story/stock-caution-urged-as-margin-debt-levels-hit-new-highs-2014-03-09  That is a good indication that the hedge funds and proprietary traders are hard at work using Fed stimulus money, provided by banks. You see, a big commercial bank borrows cheap money at the Fed window and loans to its subsidiary, which happens to be a brokerage firm. The brokerage firm then lends the money to its margin investors – but that’s another discussion. The Fed recently demanded that banks not do that anymore, but …

Part of the rise in the stock market is due to corporations buying back their own stock, borrowing the money to do that from banks that are not making loans to small businesses.

When small businesses can’t borrow, they can’t hire and expand. When they can’t hire and expand, their employee-consumers don’t have money to spend and the recovery doesn’t happen. That’s what is happening now.

If you have even the slightest doubt about what I am saying, read this article: http://www.zerohedge.com/news/2014-03-10/20-mind-blowing-facts-us-retail-apocalypse

A large portion of the rise in real estate prices comes from offshore investors, hedge funds and wealthy individuals who are buying up blocks of REO and desperation sales, with money borrowed at the low rates created and maintained by the Federal Reserve. Few ordinary people can buy a home because they don’t have perfect credit scores, but the big boys can.

The Fed has done what it usually does to boost the economy into a robust recovery, but the money supply isn’t acting like it usually does. It isn’t making it to Main St. where it is needed because Main St. can’t borrow at the same low rates, or borrow at all, for that matter. That’s because small businesses and their owners don’t have the assets anymore to back up their borrowings. This means assets are accumulating in a place that doesn’t help the economy: the stock market, institutional and overseas investment. Whether you think this is brilliant or evil Capitalism, or due to the progressive or regressive American Way, or not — it is NOT sustainable. History teaches us that, and has so many times.

Please. I don’t care what your conspiracy theories are. Can’t you get it into your brain yet that it doesn’t matter? It really doesn’t matter who is conspiring with whom to do what to the American people. Economic recovery will fix the problem. But where is the economic recovery we were promised?

We are most truly in a mess and it isn’t getting better anytime soon. The only way out is if everyone decides it’s time to do something productive – anything productive. The recoveries always come from Main St. and, this time Main St. has to do all the heavy lifting.

The truth is that interest rates were so low at the time of the credit crisis of 2008, there was very little left for Ben Bernanke to work with in creating economic recovery.

What made it hard to get money to Main St. small business was the historically low interest rates that made it difficult for banks to make money. Yep. Banks have not had it easy, either. It costs a lot to run a modern bank these days and they just can’t afford the risk of lending to any but the most secure borrowers. Their cost of funds is low, but so is the interest earned on their reserves and the interest earned from their loans. That’s why they are charging fees for everything, which now makes up the majority of their revenues. You can hate banks, but you don’t want them to go out of business.  

Banks, and the big corporations for that matter, have gone to the Dark Side because the Dark Side has been made so attractive by our politicians, and whoever decided it was a good idea to make it easy for companies to move manufacturing offshore.

Back in the 1980s, it became clear that the US had priced itself out of world markets thanks to our high wages and high prices. Sending manufacturing offshore raised the wages of people in emerging economies, so we were creating more new consumers. Unfortunately, part of the bargain seems to be that US wages have been steadily declining.

Face it: We’re on our own.

Rules of the New Way Things Are:

You can’t afford a $750,000 house on a $60,000 salary.

Oh, I guess you supposedly learned that lesson a few years ago but do you realize it wasn’t the bank’s fault you lost that house? It was YOU who decided you can afford to pay a price that was way beyond your pay grade, and commit to all kinds of screwy loans that you didn’t understand just so you could bury yourself in debt. Yeah, yeah … I know you were taken advantage of. You thought you would be able to live in the house for a couple of years and then sell it for a cool million, buy a place in Costa Rica and walk the beach at sunset wearing Tommy Bahama clothes. You thought things would just keep going up, and you were wrong.

Nobody is going to bail you out.

If you can’t get a job, either make your own job or help someone else start a company.

What can you do that people will pay you to do? (I’d suggest not becoming a drug kingpin like on TV.)

There are people who have money to pay for things they want, so there is still opportunity. Your job is to figure out what they want, then figure out how you can sell it to them. And I’m not talking about what you can sell to Donald Trump that he doesn’t have already. I am talking about what products or services the ordinary people living near you need.

A friend of mine tried everything for years and just couldn’t get back in the ranks of the employed in anything having to do with his profession. So he started driving a cab. That was about two years ago. He now owns his own cab company and is making more money than he ever did. He went around to all the bars and restaurants in town and marketed his services, again and again. He picked up bar patrons and sold them on the idea of calling him to pick them up and take them home each time they went out. His customer service was perfect and he greeted all his customers with a smile. He worked hard but it paid off very well. It’s those little details like great customer service and a smile that can be the foundation of a very successful company, as it has so many times in the past.

You don’t need venture capital.

Really. We’re talking about starting small, and that’s where your creativity, shoe leather and consistent determination come in. It’s not easy, and you might need to drive a taxi for a while until you think of what to do. Your alternative is to continue doing what you are doing now, hoping to make it somehow until the economy recovers.

Tell me, do you think you can continue as you are for two more years? Three more years? By then, will anyone hire you? You don’t need big money to start a very small business. You also don’t need big money to grow that business until it can pay for its own expansion. You might need only little money or no money at all. What you do need is persistence. Fall down a thousand times, get up a thousand and one.

Get rid of your drug of choice: Ego.

In other words, get over yourself. Own your mistakes. Like I said, life doesn’t give out little trophies to the loosing team just to make everyone feel good. There is a massive change taking place in the Way of the World. It might help to do a little reading about the Great Depression to get some perspective on how close we really are. The spinmeisters are calling what we are now living through the … and get this … Great Recession. Heck, it’s comparable to the Great Depression the old folks tell us about. My father once told me that during the Depression, you lost everything. It was terrible, but when it was all over all you could think of was “Whew! I survived!”

It’s time for the people of this country to make their own recovery.

Nobody is going to do it for you. In fact, you might see some of the assistance you depend upon reduced or taken away, entirely. You might see stock market crashes and another dip down further in recession. You might see house prices go back to their lows, or lower. You might see even higher prices at the grocery store and even higher taxes on things you buy. Think like the guys in the reality survival shows. Work as a team with other people and find your way out of disaster together. It’s our only hope.

Keep in your mind the vision of thousands or millions of new little businesses, each doing what it does better than anyone else, faster, more responsively and with a smile. Get out there and show what America is made of, because corny as it might sound to you as you read these words, it is exactly what the fabled American Spirit is all about.

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