It’s that time of year again. Yes, one of my favorite blogs of the year. I have always enjoyed writing about my experiences at conferences and conventions. This blog is going to be great. Why so great you ask?
Reconstructing the Consumer to Boost Small Business
An often asked question is, “How can the United States help small business thrive?” The quick and easy answer is in creating financially stable consumers. Over the past four decades the United States has seen wage stagnation, if not deflation, due to the combination of globalization, technology advances and two worker families. This squeeze on earning power has left businesses in a struggle to compete for the remaining disposable income of its potential customers. While in an ideal world the most beneficial means to improve the position of the American consumer would be steady and controlled wage inflation, the simpler and quicker fix is to reduce certain fixed costs bore by consumers on a daily basis.
So how would the United States accomplish this? The good news is that since the housing collapse of 2008 small businesses, such as mine, have enjoyed selling to far more liquid consumers due to reduced cost of living expenses associated with their reduced mortgage or rent payments. With that issue rectified the next best action for the U.S. Government is to attack speculation in the oil and gasoline markets that are pinching consumers’ budgets everyday. Money spent on gasoline affects everything from whether a family goes out to eat more than once a week, to taking a vacation. On a personal note, the price of gasoline also factors into whether a consumer can afford to make a car payment or is forced to drive something older and less desirable.
If the United States government could effectively eliminate the trade of oil and gasoline as an exchange traded commodity, wholesale prices for oil and gasoline would plummet. If this targeted and systematic attack by the United States against the manipulation of these essential commodities was successful, small business would increase its revenue by 30 percent for every $1.00 decrease in the price at the pump.
The largest inhibitor to this theory working in reality is that most legislators don’t understand the issue. The US has a glut of supply and insufficient demand, so economics 101 says “prices must fall,” yet the opposite is what is occurring. Shipping companies and refineries are closing due to their margins being decimated by overpriced input costs against a reality that a glut of supply has reduced the necessity for their services. Thus, the lynchpin issue to attacking high oil and gasoline prices lies in addressing the supply and demand inefficiencies for the futures contract, not the commodity. Fix this issue and small business will thrive.