Wednesday, February 17, 2010

Priming the Pump- Where is all that Money?

High on the list of the side effects of our current economic malaise is the fact that many community banks have stopped lending money to local shovel ready projects that are waiting for funds to be released so that construction can start. The Government tried to solve this problem by forcing money down the throats of the large investment banks at very low interest rates- hoping that the investment banks would then lend the money to the community banks at a low rate of interest . But instead of injecting that money into the community banks where it could be lent to local developers and contractors, many of the investment banks invested it back into the stock and security markets. As a result, the large investment banks are reporting very nice profits for themselves as the stock market rises but little  money is being injected into the part of the economy that  creates  jobs. In essence too much of the money is just circulating around in a loop through the pockets of the investment banks and high rollers, and not enough is finding it's way into the general economy. This problem could be solved if the Government would infuse money directly into the local community banks, instead of going through the large investment banks with the naive hope that they would pass the money on down the line. There is a lot of money out there but it's just not getting to the people who can put it to good use and create jobs.

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