by HAL9000 » Sun Aug 28, 2011 10:24 am
One fundamental problem with the credit system that financial institutions are not lending to new, small companies, which are the main engine of growth. This is because financial institutions want profitable loans. If the Fed lends to small companies half the trillions that it is lending to financial institutions at near-zero interest rates, this would change a lot of things and unemployment would decline dramatically.
But interestingly enough, as long as the governments are doing deficit spending, this annual deficit spending of the government becomes the net annual profit of the corporations, and THIS is precisely why the existing well-established big companies do NOT want banks to lend to new and small companies because if new businesses grow, then they would be competing for the profits of the existing companies which have quasi-monopoly status due to the barriers the financial institutions are creating against the financing of new companies.
And if the government creates special non-profit financial institutions geared lending to small companies at low interest rates, this would dramatically ignite the economy.