Financial Dysfunction

   How does economic recovery start?
   One theory says the best way is to provide incentives to the "job creators," the entrepreneurs and investors, and eventually, the benefits will trickle down to the rest of the people.
   This is true enough, but only if the wealthy, the investors, the bankers and the entrepreneurs actually do take action to stimulate the economy by increasing production, starting new projects, hiring more workers and providing wages so the un-wealthy can pay for food, clothing, shelter and perhaps a few extras.

   Money is the lifeblood of a modern economy, but if the flow stops, the economic body suffers what can be called financial cardiac arrest; if the money flow stops, so does the economy.
   When consumers reduce their purchases, for whatever reason, producers slow their output because they don't want to be stuck with excess, unsold inventory. As the economy shows signs of slowing, manufacturers abandon plans to expand, and entrepreneurs delay plans to start new companies, partly because bankers and investors are wary of backing new projects.
   So begins what economists call a "vicious cycle." Consumption slows, production slows, expansion slows, investment slows, employment slows, consumption slows, and the cycle continues.
   Henry Ford had the right idea when he paid workers well above subsistence wages, on the theory that they would have enough money to buy the cars the company was making -- a "virtuous cycle."

   It's a fine idea to encourage job creators in the private sector to hire workers and expand production, but if they won't or can't because bankers and investors refuse to finance new projects, then it's time for a higher power to step in.
   And since divine intervention is not likely, that leaves government.