Assessing the Changing American Economy: A Call for Comprehensive Solutions and a Huge Concern For Small Business

"The economy that the government is reporting is not the economy that Americans are feeling"

​Michael Lodge - The Business Advisor - www.lodge-co.com:  We have gotten off track and have focused on areas that have nothing to do with the economy or running businesses.  Political leaders have focused so much on nonsense that they have not focused on the Economy.  The economy has been ignored by the President on down to the local governments.  Even in the corporate world they have not paid attention to how fast things now move in the economy, new ideas in other currencies, without regulation, environmental and social scoring, that the art of business has been destroyed.  The reporting that is done by government is now bad data in and bad data in, in fact it is so bad that they can't make good decisions.  We need a change.

The American economy has undergone significant transformations over the years, leading to both advancements and challenges. Today, we find ourselves grappling with a range of complex issues, such as the acceleration of money movement, soaring government debt, surging individual debt, outdated financial models, incomplete economic data, and distressing trends in sectors like commercial real estate and the auto industry. It is crucial that we examine these various facets collectively, rather than focusing on isolated fragments, in order to make informed and effective decisions for the future.

1. The Speed of Money Movement:  One notable change in the American economy is the rapid acceleration of money movement. Technological advancements, particularly in the realm of digital payments and global financial transactions, have made it easier than ever for money to flow across borders. While this has undoubtedly facilitated international trade and investment, it has also introduced new challenges, such as the potential for increased economic volatility and financial vulnerability.  With the fast movement of money it hurts the reporting and analyses of the data because the numbers change rapidly. The quality control on the money has been corrupted.

2. Rising Government Debt:  Another significant shift is the alarming rise in government debt. Years of fiscal imbalances, coupled with factors like tax policy, increased spending, and economic downturns, have contributed to mounting levels of public debt. This trend poses long-term risks, including reduced fiscal flexibility, increased interest payments, and potential constraints on future economic growth.  All levels of government have become so political and against each other, they refuse to work together to accomplish a goal - stop spending and creating debt.  We never talk about the individual loans and debt created and what can be paid down.  Starting with the smallest loans first and paying them down, instead the government keeps adding onto the debt.  No one has gone through and sat down with the lenders and renegotiated terms.  We see no plans out there from any form of government to address and attack the nations debt.  Debt can destroy a family and it can destroy a government.

3. Escalating Individual Debt:  The American economy has also witnessed a surge in individual debt levels. Factors such as easy access to credit, rising healthcare costs, stagnant wages, and a culture of consumer lower spending of consumerism have fueled this concerning trend. High levels of individual debt can hinder economic mobility, limit investment opportunities, and increase financial vulnerability for households.

Americans credit card debt has gone out of control because of the pandemic and inflation.  The average American credit card debt is concerning.  Generation X - ages 41 - 56 - has the highest average credit card debt at $7,070.  Gen Z and Millennials saw their average credit card debt increase from 2020 to 2021 - by 11.5% and 5.2%, respectively - while averages dropped for those 41 and older.  In total, Americans have an absolute mountain of credit card debt - $986 billion!  This is a red flag for banks and could, or will, hit their bottom line.  If bank do not become more aggressive in managing this risky debt, they will be hit with huge losses.

4. Outdated Financial Models:  The fast-paced nature of economic change has outpaced the adaptability of traditional financial models. Many of these models were developed based on historical data and assumptions that no longer hold true in today's dynamic landscape. This has made it increasingly challenging to accurately predict and manage risks, leaving us susceptible to unexpected shocks and systemic failures.

5. Incomplete Economic Data:  Accurate and comprehensive economic data is crucial for effective policy-making and decision-making. However, concerns have been raised regarding the accuracy and completeness of economic indicators such as the Consumer Price Index (CPI) and unemployment reports. Inaccurate or incomplete data can distort our understanding of the economy, impede effective policy responses, and erode public trust.

With bad data going in you get bad economic policy going out.  We can't continue to look at these government reports on the economy because they have been corrupted by politics, no real economic value comes out of these outdated reports.  Let's be honest, the unemployment number bragged about by government is so badly reported that it is not telling Americans the true unemployment picture of the nation.  Will government try and fix it?  Probably not, they really don't care.

6. Commercial Real Estate Challenges:  This is a big red flag for the banking industry.  The commercial real estate sector is facing significant headwinds, with increasing defaults and foreclosures. Changing consumer behavior, the rise of e-commerce, and the COVID-19 pandemic have disrupted the traditional brick-and-mortar retail model. The need to repurpose or reimagine commercial properties is becoming increasingly urgent to prevent further economic losses.

7. Auto Industry Troubles:  This is a big red flag for the banking industry.  The auto industry has experienced its share of difficulties, with rising loan defaults and repossessions. Factors such as subprime lending, stretched consumer finances, and economic uncertainty have contributed to this trend. Addressing these challenges requires a comprehensive approach that includes promoting responsible lending practices, supporting consumer financial literacy, and fostering a healthy and sustainable auto market.

To navigate the complexities of the modern American economy, it is imperative that decision-makers adopt a holistic approach. Addressing bits and pieces of the economy in isolation will not yield sustainable solutions. We must acknowledge the acceleration of money movement, tackle rising government and individual debt, update financial models to keep pace with change, and to build to build new financial strategies based on good data.

The other area that government has failed at is in supporting small businesses throughout the United States.  The government during the pandemic destroyed the existence of small businesses.  Government policies and taxation has closed many businesses, their lack of enforcement of law on retail crimes on small businesses have destroyed the inner city business communities.  Instead of protecting the business community and lead the attack on small businesses by allowing crimes to continue, no arrests made.  This is not the fault of police, it is the fault of the leadership of city governments and bad district attorneys.  Small business has been completely ignored by all levels of government.

Small businesses are the backbone of the American economy, contributing significantly to job creation, innovation, and economic growth. However, in recent years, many small businesses have faced an uphill battle, grappling with increasing failure rates, bankruptcy filings, and a lack of access to adequate funding. Understanding the underlying factors behind these challenges is essential for policymakers, financial institutions, and the business community to develop effective strategies and support mechanisms.  Let's look at other issues small businesses are facing without any concern by government.

1. Failure Rates on the Rise:  The small business landscape has witnessed a troubling increase in failure rates. Numerous factors contribute to this trend, including fierce competition, changing consumer preferences, inadequate market research, and insufficient business planning. Additionally, external shocks like economic downturns, natural disasters, and the COVID-19 pandemic have further exacerbated the vulnerabilities faced by small enterprises.

2. Bankruptcy Filings and Legal Challenges:  Mounting financial pressures often force small businesses into bankruptcy. Bankruptcy filings can stem from various causes, such as overwhelming debt, declining revenues, operational inefficiencies, or legal disputes. The process of bankruptcy can be complex and costly, leaving business owners with limited options and often resulting in the closure of the enterprise.

3. Limited Access to Funding:  One of the most significant challenges faced by small businesses is the lack of access to adequate funding. Traditional lenders tend to view small businesses as riskier ventures, making it difficult for entrepreneurs to secure loans or lines of credit. This limited access to capital hinders business growth, restricts investments in technology and infrastructure, and stifles innovation.

4. Insufficient Financial Management:  Inadequate financial management is a common issue plaguing small businesses. Poor bookkeeping, inadequate cash flow management, and limited financial planning skills can lead to significant challenges in sustaining operations and meeting financial obligations. Without a solid financial foundation, small businesses become more vulnerable to economic downturns and unexpected disruptions.

5. Regulatory and Compliance Burdens:  Small businesses often struggle to keep up with the complex web of regulations and compliance requirements. Complying with labor laws, tax regulations, licensing requirements, and industry-specific regulations can be time-consuming and costly. Navigating these regulatory complexities diverts resources away from core business activities and can overwhelm small business owners.

6. Limited Technology Adoption:  In an increasingly digital world, small businesses that fail to embrace technology risk falling behind their competitors. Limited technology adoption can result in operational inefficiencies, reduced productivity, and difficulties in reaching and serving customers effectively. The lack of technological infrastructure and digital skills among small business owners can hinder growth and limit competitiveness.

7. Lack of Mentorship and Support Networks:  Small business owners often face isolation and a lack of guidance. The absence of mentorship programs, business support networks, and access to experienced advisors denies entrepreneurs valuable insights, opportunities for collaboration, and the chance to learn from others' experiences. Mentorship and support networks are critical in helping small businesses navigate challenges, make informed decisions, and foster resilience.

Conclusion:  The challenges faced in this economy and by small businesses in the United States, including increasing failure rates, bankruptcy filings, and a lack of funding, demand urgent attention and supportive measures. Policymakers, financial institutions, and the business community should work collaboratively to alleviate regulatory burdens, enhance access to funding, provide targeted financial education and mentorship programs, and promote technology adoption. By addressing these challenges, we can foster a thriving ecosystem where small businesses can flourish, create jobs, and grow.