You don't lend when politicians are making it more doubtful whether you are going to get your money back-- either on time or at all. From the White House to Capitol Hill, politicians are coming up with all sorts of bright ideas for borrowers not to have to pay back what they borrowed and for lenders not to be able to foreclose on people who are months behind on their mortgage payments.
President Obama keeps telling us that he is "creating jobs." But more and more Americans have no jobs. The unemployment rate has declined slightly, but only because many people have stopped looking for jobs. You are only counted as unemployed if you are still looking for a job.
If all the unemployed people were to decide that it is hopeless and stop looking for work, the unemployment statistics would drop like a rock. But that would hardly be a solution.
What is going on, that nothing seems to work?
None of this is new. What is going on is what went on during the Great Depression of the 1930s. Money circulated more slowly during the 1930s than during the 1920s. Banks lent out a smaller proportion of the money they had on hand during the 1930s than they did in the 1920s. Anti-business rhetoric and anti-business policies did not create business confidence then, any more than it does now. Economists have estimated that the New Deal prolonged the depression by several years.
This is not another Great Depression, at least not yet, and the economy may recover on its own, if the government will let it. But Obama today, like FDR in the 1930s, cannot leave the economy alone. Both have felt a need to come up with one bright idea after another, to "do something."
The theory is that, if one thing doesn't work, it is just a matter of trying another. But, in an atmosphere where nobody knows what the federal government is going to come up with next, people tend to hang on to their money until they have some idea of what the rules of the game are going to be.
Bernie Sanders and Robert Reich Are Confused by Economics. And Government. And Reality | Seton Motley