Wall Street, Main Street, Peptic Ulcers

Friday Sep 14, 2012

The Fed has announced a new phase of Quantitative Easing which it hopes will drop unemployment to 7% years from now. Main Street is still suffering. Wall Street, on the other hand has recovered. Big profits, big bonuses.

I am part of Main Street. I own a retail business located on a historic square in a small town in Texas. We have a lake and other attractions. We are near cities that are well over a million in total population. We have nice scenery, two running rivers, one with clear water and a rocky bottom. We have some of the best golf courses in Texas and lots of nice places to stay, including some romantic bed and breakfast places on the lake and the rivers. Our city even built a very nice sandy beach on the lake a year or two ago and it attracts lots of families. We have a nice, new convention center. We have been a mecca for tourists for decades.

My store has long been successful. But my sales are now only 33% of what they were when the Bush crash started. We still get lots of traffic, we still have the same events on the square that attract just as many people as always, I have good merchandise, well-priced, in a desirable location, but if I did not have enough personal capital to keep the thing going then I would have closed a year ago. But I have loyal employees who would probably not be able to find jobs if I closed. So, I keep it going. But I have told them all that I will reevaluate everything at the end of next May.

On my side of the square, every retail business but mine and one other, a sandwich shop, has changed hands. Buildings have been sold because mortgage payments could not be met. The same is true of the other sides of the square. People have tried for years to hold on, but most of them are gone. The replacement businesses on my side of the square are already in trouble. They get lots of traffic, but few sales.

In my neighborhood my neighbor on one side works for UPS and has done so for years. But his financial outlook is depressed. UPS has suffered and so has he. He is discouraged.

My neighbor across the road works for one of the largest power plants in Texas and they have now dropped the pension plan for employees, plus many plans for enlarging the facility have been dropped because of the cost of capital.

I am lucky. But even then, I may outlive my money if I have to close. So, I am part of Main Street, and I want things to change. The Fed has not helped, or if it has, it has not helped enough. The system is broken. The dominant economic theories are failures. The system needs to be changed, but I don’t see anyone anywhere who is doing anything about it. Reelecting the same old candidates to run the same failed system is not change.

But ideas for change are buried under comments that support the status quo. I don’t understand it. It reminds me of the history of the cure for peptic ulcers.

In 1958, a Greek physician began treating patients with peptic ulcers by giving them antibiotics. It worked, but the authorities of that day ignored the cure. After all, he was Greek, and the causes and treatments of peptic ulcers were already known.

Time passed as millions of people suffered unnecessarily.

In 1982, two Australian scientists asserted that the ulcers had a bacterial cause. Their paper on the subject was largely ignored. In order to make a point, one of them actually drank a culture from the stomach of a patient who had symptoms of the ulcer. This scientist developed the symptoms himself five days later. This experiment was published in 1984.

Time passed as millions of people suffered unnecessarily.

Finally, in 1997, the American medical establishment launched a program to educate medical practitioners and things began to change. Suffering of millions of people was ultimately eased.

In 2005 the two scientists were awarded the Nobel Prize in Medicine. All’s well that ends well.

So many blogs about our economic problems follow the same path. So many authorities are so sure of themselves, while people suffer unnecessarily. Some day someone will propose changes to the system, perhaps those proposals have already been made, and the suffering will end. Who knows? But what we do know is that most, nearly all, of those who are currently economic experts will not come up with the ideas, and they will bitterly oppose the ideas when they do emerge.

But, for someone, a Nobel Prize awaits.

Until then, millions of people will suffer unnecessarily.

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