Author Topic: Rant: Why aren't small businesses asked "Did you have 6 months emergency fund?"  (Read 1647 times)

ctuser1

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This is off topic forum, so I thought to post my "not very constructive" rant here. This has been bothering me for some time!

Off late - I hear loads and loads of opinions bemoaning the plight of the small businesses. Yes, they *are* under a lot of stress. Yes, majority of them will likely not survive - and the small business owners deserve our sympathy.

But, there seems to be a massive double standard at play here!!

I am an "individual". i.e. my one person small business is selling my labor for a price, called a "wage". I have gone through 10+ layoff cycles (thanks to surviving in the epicenter of the 2008 crisis), but thankfully avoided being actually laid off.

Through all these, I was repeatedly given advice to shore up my emergency fund - sound advice for which I am thankful!! There is even a cottage industry of personal finance experts to package this message in a zillion different ways and try to sell it to all "individual"s that will care to listen.

Come today, when other types of "small businesses" (specifically ones that use leverage of capital AND labor) as a means of earning their money, are under duress, that advice of building up emergency fund etc are strangely absent. It appears to me that people don't expect the same degree of financial discipline from "leveraging" small businesses as they do from non-leveraging individual small businesses (i.e. the likes of I and others like I).

How and why did this absurd double standard built up in America? Where a certain types of small businesses (a shop owner) is considered "superior" and not subject to the same disciplines that individuals like I are?

It does not seem to be the "traditional" american culture. When I watch "It's a wonderful life" - the vibe seems almost embarrassingly anti-business (too far in my opinion). Any opinions when/how/why did America turn against Americans? Is it entirely the Ayn Rand and Reagan effect that is at it's peak now? Or is there something else I am missing here?

maizeman

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Off late - I hear loads and loads of opinions bemoaning the plight of the small businesses. Yes, they *are* under a lot of stress. Yes, majority of them will likely not survive - and the small business owners deserve our sympathy.

But, there seems to be a massive double standard at play here!!

I am an "individual". i.e. my one person small business is selling my labor for a price, called a "wage". I have gone through 10+ layoff cycles (thanks to surviving in the epicenter of the 2008 crisis), but thankfully avoided being actually laid off.

Through all these, I was repeatedly given advice to shore up my emergency fund - sound advice for which I am thankful!! There is even a cottage industry of personal finance experts to package this message in a zillion different ways and try to sell it to all "individual"s that will care to listen.

Come today, when other types of "small businesses" (specifically ones that use leverage of capital AND labor) as a means of earning their money, are under duress, that advice of building up emergency fund etc are strangely absent. It appears to me that people don't expect the same degree of financial discipline from "leveraging" small businesses as they do from non-leveraging individual small businesses (i.e. the likes of I and others like I).

How and why did this absurd double standard built up in America? Where a certain types of small businesses (a shop owner) is considered "superior" and not subject to the same disciplines that individuals like I are?

I agree it's not the same standard, but part of that is because (under normal circumstances) we're much more okay with letting small businesses go bankrupt than we are with letting people starve to death/die of exposure.

If 20% if infants died before they were a year old from lack of money (and 50% before they reached five years of age), that'd be a national outrage. However we are, rightly, okay with that level of failure from small businesses.

We're more okay with organizations choosing courses with high risks of destruction than we are will human beings choosing courses with high risk of death (or even significant destruction of happiness and lifestyle). So it makes sense there isn't as much pressure on businesses to build up a safety net as there is pressure on human beings to do the same.

The problem arises when situations like the one we find ourselves in today, where it turns out that, while we're okay with individual small businesses failing, we realize not okay with lots of them failing all at once. And then questions of expediency and moral hazard enter the picture and it gets much more messy.


MrMoogle

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Well if it's a new small business, they don't generally don't make profits for the first 2 years:
https://www.freshbooks.com/hub/startup/how-long-does-it-take-business-to-be-profitable
So there's no way to save up for an emergency fund.

For older businesses, I'm guessing it's similar to the individual sector.  Mustachians aren't sweating this, but there's few of us.  There's few businesses that are frugal.  Lots of individuals don't know how to pay their rent without stimulus checks, and it's going to be similar with businesses. 

Larger businesses can probably get loans to get them through rougher waters like this.

That's my guess though.

Much Fishing to Do

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I guess there is just no incentive to.  Business (LLC/Corp/etc) protections do a good job insulating personal monies from a business failure.  For small businesses, at least its easy to pay oneself most of the profit, thus insulating the monies over time.  So in the end as long as the business is "adequately capitalized"...which isn't much of a threshold...it would silly to have a huge emergency fund within the business (as opposed to outside of the business).  If your business is failing you can decide to recapitalize it (which for a profitable business is basically just putting the profits back at risk because you think things will turn around, so be worth it), or let it fail and start the next business or not.  I guess its all been set up this way to encourage the risk taking of starting a business to counteract the "average business fails within 3 years" talk for anyone with any personal wealth to lose.

I had a business with very small fixed costs vs the variable, so none of this was really that big an issue (I sure most would have thought I was over-funded as I was).  I personally couldn't stand any of these situations (having a business on the edge, not paying a debt owed whether it was business or personal), so I would probably not have made for a very good owner of a business that required a large payroll or a corporate lease.

Bloop Bloop

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I generally agree. I think both individuals and businesses should take more personal responsibility. But we bail out individuals pretty well and we bail out businesses even more so (you can just liquidate a business and that's it, bada boom bada bing) so there's no hope for expecting people (as individuals or businesses) to be conservative with their finances.

ctuser1

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I had a business with very small fixed costs vs the variable, so none of this was really that big an issue (I sure most would have thought I was over-funded as I was).  I personally couldn't stand any of these situations (having a business on the edge, not paying a debt owed whether it was business or personal), so I would probably not have made for a very good owner of a business that required a large payroll or a corporate lease.

Keeping a large "emergency fund" is not necessarily "bad business". Bill Gates used to carry more than 2 years of payroll expenses of Microsoft from the beginning of Microsoft when he started hiring others.

EngagedToFIRE

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It's not a double standard or absurd at all, business and personal finance are extremely different things.

The main issue is the cost of employees.  You think a small business should save up 6+ months of wages?

erutio

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6 month emergency funds are probably just as rare in individuals.  Mustachians are extreme outliers.

LennStar

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In capitalism, meaning here a competetive fighting on the market, everyone who does a risk averse "mustachian" course will be outperformed by those who don't - as long as everything is good.
That was the reason why the 2008 crash was so bad - the rsik takers in the banks have been promoted again and again and the others.... weren't. Maybe fired they were.

So even if you wish to be "financial responsible", chances are that is the reason you go bankrupt and not your competition. Efficiency of the market, you see?

That is similar to the fact that actively managed funds that are the top10 in one decade often are more to the down10 in the next decade: A certain stragety works axtraordinarily well at certain circumstances, and very bad at all others.

Not to mention that in case of big companies they know very well that the tax payer will save them.

VW wants another car buying incentive from the state (as in 2009), additionally to the general short-work-money. After they have blatently lied to everyone. And they will pay dividends, probaby around 5% of current stock price.
Paying dividends and violating laws that are meant to protect people while getting tax payer money, and there are still people who wonder where "anti-capitalism" comes from?

J Boogie

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I think the reason small businesses are coddled, mythologized, and patronized by politicians is that deep down they know the environment has become awful for small businesses, and that they've played a major role in that, and they've probably benefited greatly from it.

The biggest way the govt has made the environment bad for small businesses is via healthcare legislation that results in far more affordable coverage for employees of large companies. There is also the fact that larger companies have the means to lobby for their specific interests, while smaller business have to join associations to lobby for preferential legislation that might not help them all that much in particular. There are also farm incentives that make every field a corn field, relegating the notion of any pre-WWII feed the community style farming to a retirement pursuit because obviously you won't make money.

Meanwhile politicians love to romanticize small businesses because it feels American. It's part of the American myth. The self made man, the bootstraps. Deep down inside politicians know the world they've helped create has been hostile for small business, and to assuage their consciences they speak highly of SBs and would never wag their fingers at SBs.

TLDR;

SBs are an endangered species in part due to govt policies; rather than protect the endangered species politicians offer unwavering lip service.


Fishindude

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Many private businesses do carry six months or more cash reserves.
Many farmers only get paid at fall harvest and have to operate a full year on that.  If they're smart they'll have more than that available, as you never know when you might have a crop failure or bad year.

trollwithamustache

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 You can't just leave unlimited amounts of money in your "business" as a reserve and say you didn't have profits or income. You can keep retained earnings in the business, but they will have been taxed. So if there is a lawsuit or something, why keep extra assets in the business?

Big C corps (poster referenced Microsoft) have a different set of rules and can hold a lot more money in the business. Or, if you have investors put a pile of cash into your business, you can hold that in there. But thats not really an emergency fund.

The accountants can explain this better.



AccidentialMustache

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Many private businesses do carry six months or more cash reserves.
Many farmers only get paid at fall harvest and have to operate a full year on that.  If they're smart they'll have more than that available, as you never know when you might have a crop failure or bad year.

Smaller farms (and, honestly, even a lot of the larger farms) very regularly get a line of credit from a bank for annual operating expenses (seed/chem/fert/fuel/pay/etc). That's not cash reserves.

marty998

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LennStar

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

chemistk

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DadJokes

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

It's pretty obvious by the fourth paragraph that what you're about to read is going to be a very slanted article.

It may be 100% true, but I'm not going to trust a source that conveys it in such a judgmental tone.

LennStar

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

It's pretty obvious by the fourth paragraph that what you're about to read is going to be a very slanted article.

It may be 100% true, but I'm not going to trust a source that conveys it in such a judgmental tone.
So the dialect of the speaker is more important to you than the message?

ctuser1

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

It's pretty obvious by the fourth paragraph that what you're about to read is going to be a very slanted article.

It may be 100% true, but I'm not going to trust a source that conveys it in such a judgmental tone.

It's rather simple to go to the source and read up wikipedia summaries of the original work(s) of Buchanan in question (I did).
https://en.wikipedia.org/wiki/The_Calculus_of_Consent

I have not spent the weeks, at a minimum, required to gain a passing familiarity with the concepts of public choice theory (or likely years to gain a good familiarity). But I have a shortcut - one that I extensively employ when interviewing candidates for technical positions in domains I know nothing about (e.g. someone who primarily worked in a language I have never coded in).

You take the mathematical or logical inner core of the theory they propose (thankfully economics like to express their theories in concise mathematical expressions).

e.g. the statement "Employing the theoretical concepts of game theory and Pareto optimality, Buchanan and Tullock show that symmetry in benefits sharing may be at most a necessary, but never a sufficient condition for the attainment of a Pareto optimal position. The introduction of side payments is the crucial element, which would lead to optimality. In a sense the introduction of side payments creates marketable property rights of the individual political vote (Chapter 12)."..

A true expert with correct motives will highlight issues on all sides of this theory, the ones convenient with their political outlook, and the ones that are not.

e.g. for this specific statement, it could be asked:
Symmetry in benefits sharing is a necessity, is that necessity maintained by future political prescriptions made by Buchanan (e.g. the "side payments"). e.g. is the benefits of lobbying (i.e. side payments) equitably shared by the society?
Was this asymmetry foreseeable?

Then I go to read more popular economics writings of Buchanan. He - rather deliberately - misuses the word "collective" interchangeably to mean "coercive". In his language - a book club started up collectively (i.e. without strict one-to-one agreements between all combinations of participants), would likely be considered a coercive arrangement since it is a "collective" one.

Using such rhetorical devices to explicate just one side of the arguments in an area of your expertise in a debate is just as much of a bad form today as it was when Aristotle wrote the "Art of Rhetoric".

So, without spending the years necessary to develop expertise in the relevant areas in the public choice theory I can still come up with an opinion on whether Buchanan was engaging in quackery when he engaged with the political process in just a few hours and with a high degree of confidence.

Unfortunately, to me the answer seems to just as much "yes" in Buchanan's case as it is for Arthur Laffer. They were both primarily politicians masquerading as economists - and in Buchanan's case a rather competent and intelligent one.

This is not meant to take away anything from Buchanan's core work. From all I can read (I'm no expert), he did have some very useful insights and advanced the public choice theory a lot.
« Last Edit: May 01, 2020, 10:19:14 AM by ctuser1 »

DadJokes

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

It's pretty obvious by the fourth paragraph that what you're about to read is going to be a very slanted article.

It may be 100% true, but I'm not going to trust a source that conveys it in such a judgmental tone.
So the dialect of the speaker is more important to you than the message?

Just like NBCSN, CNN, or Fox News, when the person conveying the information has an obvious bias, they are going to leave out any information that disagrees with that bias.

ReadySetMillionaire

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This is off topic forum, so I thought to post my "not very constructive" rant here. This has been bothering me for some time!

Off late - I hear loads and loads of opinions bemoaning the plight of the small businesses. Yes, they *are* under a lot of stress. Yes, majority of them will likely not survive - and the small business owners deserve our sympathy.

But, there seems to be a massive double standard at play here!!

I am an "individual". i.e. my one person small business is selling my labor for a price, called a "wage". I have gone through 10+ layoff cycles (thanks to surviving in the epicenter of the 2008 crisis), but thankfully avoided being actually laid off.

Through all these, I was repeatedly given advice to shore up my emergency fund - sound advice for which I am thankful!! There is even a cottage industry of personal finance experts to package this message in a zillion different ways and try to sell it to all "individual"s that will care to listen.

Come today, when other types of "small businesses" (specifically ones that use leverage of capital AND labor) as a means of earning their money, are under duress, that advice of building up emergency fund etc are strangely absent. It appears to me that people don't expect the same degree of financial discipline from "leveraging" small businesses as they do from non-leveraging individual small businesses (i.e. the likes of I and others like I).

How and why did this absurd double standard built up in America? Where a certain types of small businesses (a shop owner) is considered "superior" and not subject to the same disciplines that individuals like I are?

It does not seem to be the "traditional" american culture. When I watch "It's a wonderful life" - the vibe seems almost embarrassingly anti-business (too far in my opinion). Any opinions when/how/why did America turn against Americans? Is it entirely the Ayn Rand and Reagan effect that is at it's peak now? Or is there something else I am missing here?

As others have alluded to, the biggest problem in comparing individual finances versus business finances is the expense.

Individually, I've been fine, because my monthly expenses can be reduced to about $4,000/month.  So just $24,000 in savings gets me six months.

But in business, it's operating at a completely different factor.  I represent a construction company that does $5M/year in revenue.  Sounds big but you are talking a 10-12 person operation.  The owner makes about $250k a year, so about $4.8M in expenses, or $400k/month.  That is one month.  To have six months expenses, it's $2.4M in CASH. Keeping that amount of cash would be absolutely insane, especially when it comes to exposing yourself to legal liability.

Theoretically, the business could trim it's biggest expense -- payroll -- but this thing was a disaster because federal policy encouraged businesses to keep payroll.  I know multiple 50+ employee companies who have kept people on payroll to get PPP loans but have been unable to do so (for reasons I don't know).
« Last Edit: May 01, 2020, 02:11:24 PM by ReadySetMillionaire »

Dicey

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I'm guessing this point has already been made, but if I owned a small business and had reserves, I'd probably keep my mouth shut and my hand out.  Really, how many of us actually need the stimulus checks?

OTOH, my brother's wife owns a small business with two locations. They are shut down by gov't order. SIL is self-employed, so no revenue coming in. On April third, one of their location's property manager called to remind them that they had signed a personal guarantee and the rent was due. My brother had every intention of paying the rent, and did so. The he tracked down the owner of the building and relayed the warning from the PM. He also assured the owner that they would NOT be renewing their lease under the same PM. Their business is a good tenant and adds well to the shopping center's mix. They'll have no problem finding a landlord who will be happy to have them and doesn't threaten them on the THIRD of the month. Oh, and the landlord at their other location? Contacted every single tenant and offered to work with them as needed. Huge difference.

Finally, since this is all over the place, I am on the board of a small non-profit. We have one full-time, salaried executive director, one part-time assistant who is a contractor, and a very part-time bookkeeper, who I assume is also a contractor. They have an endowment approaching $1.5M. Unbeknownst to the majority of the board, the foundation applied for a PPP loan with a local bank. Someone from said bank is on this board. You guessed it, the application was approved. It's small potatoes, about $20k, but WTF? it's a NON-Profit, not a business! The majority of the board didn't hear about it until it was a fait accompli. I am still pissed. Remember what I said above about mouth shut, hand out? Not for non-profits - what the hell?

OtherJen

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I'm guessing this point has already been made, but if I owned a small business and had reserves, I'd probably keep my mouth shut and my hand out.  Really, how many of us actually need the stimulus checks?

OTOH, my brother's wife owns a small business with two locations. They are shut down by gov't order. SIL is self-employed, so no revenue coming in. On April third, one of their location's property manager called to remind them that they had signed a personal guarantee and the rent was due. My brother had every intention of paying the rent, and did so. The he tracked down the owner of the building and relayed the warning from the PM. He also assured the owner that they would NOT be renewing their lease under the same PM. Their business is a good tenant and adds well to the shopping center's mix. They'll have no problem finding a landlord who will be happy to have them and doesn't threaten them on the THIRD of the month. Oh, and the landlord at their other location? Contacted every single tenant and offered to work with them as needed. Huge difference.

Finally, since this is all over the place, I am on the board of a small non-profit. We have one full-time, salaried executive director, one part-time assistant who is a contractor, and a very part-time bookkeeper, who I assume is also a contractor. They have an endowment approaching $1.5M. Unbeknownst to the majority of the board, the foundation applied for a PPP loan with a local bank. Someone from said bank is on this board. You guessed it, the application was approved. It's small potatoes, about $20k, but WTF? it's a NON-Profit, not a business! The majority of the board didn't hear about it until it was a fait accompli. I am still pissed. Remember what I said above about mouth shut, hand out? Not for non-profits - what the hell?

Yeah, that might get interesting, come tax time. I'm on the board of a small non-profit and that really doesn't seem kosher.

JLee

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

It's pretty obvious by the fourth paragraph that what you're about to read is going to be a very slanted article.

It may be 100% true, but I'm not going to trust a source that conveys it in such a judgmental tone.

That's a bit ironic to hear from someone on the MMM train :P

LennStar

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This is a pretty illuminating read.

https://www.ineteconomics.org/perspectives/blog/meet-the-economist-behind-the-one-percents-stealth-takeover-of-america?fbclid=IwAR2LGxh5mnRQSOHMEpFVt9T1IBmFf23pVfSGA12XyAhMwHSbRlnoduWU2eM#.XqblEXdTsYQ.facebook

Interesting read, if conspiracy theory-ish.   
Hm.. where?
As far as I know, all about this is simply researched tru(ish) facts. The motives might be a bit speculation, as always, but the names and time points etc. should all be real. I certainly have heard most of that before e.g. in a show that is very reliable when it comes to those things - because they were already sued several times for it (and won every time).

It's pretty obvious by the fourth paragraph that what you're about to read is going to be a very slanted article.

It may be 100% true, but I'm not going to trust a source that conveys it in such a judgmental tone.
So the dialect of the speaker is more important to you than the message?

Just like NBCSN, CNN, or Fox News, when the person conveying the information has an obvious bias, they are going to leave out any information that disagrees with that bias.
I ring your doorbell. I say your house is on fire, and you now know where that strange sound was coming from.
But because I don't tell you if I have seen the person who caused the fire, you are going to ignore me and go back to your TV?

Yes, the author may have forgotten to mention that this economic guy was secretly not trying to let poor people die, but instead was trying to undermine every credibility of the neolibs by exaggerating it to a level everyone would instantly say "that is bad!", and he failed.
Does that change any fact?

While in case of Fox News they get a fake doctor on a show to spout nonsense about a medicine that was sold to Trump the day before.

----

Coming back to the topic of the article, I didn't want to show it, because it is German, but maybe it is still interesting since it is quite visually done. This is the part on the Mont Pelerin society (auto translated as more mobile society lol) of the satire show "Die Anstalt"

https://www.youtube.com/watch?v=vzUNwWpk6CE

trollwithamustache

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I'm guessing this point has already been made, but if I owned a small business and had reserves, I'd probably keep my mouth shut and my hand out.  Really, how many of us actually need the stimulus checks?

OTOH, my brother's wife owns a small business with two locations. They are shut down by gov't order. SIL is self-employed, so no revenue coming in. On April third, one of their location's property manager called to remind them that they had signed a personal guarantee and the rent was due. My brother had every intention of paying the rent, and did so. The he tracked down the owner of the building and relayed the warning from the PM. He also assured the owner that they would NOT be renewing their lease under the same PM. Their business is a good tenant and adds well to the shopping center's mix. They'll have no problem finding a landlord who will be happy to have them and doesn't threaten them on the THIRD of the month. Oh, and the landlord at their other location? Contacted every single tenant and offered to work with them as needed. Huge difference.

Finally, since this is all over the place, I am on the board of a small non-profit. We have one full-time, salaried executive director, one part-time assistant who is a contractor, and a very part-time bookkeeper, who I assume is also a contractor. They have an endowment approaching $1.5M. Unbeknownst to the majority of the board, the foundation applied for a PPP loan with a local bank. Someone from said bank is on this board. You guessed it, the application was approved. It's small potatoes, about $20k, but WTF? it's a NON-Profit, not a business! The majority of the board didn't hear about it until it was a fait accompli. I am still pissed. Remember what I said above about mouth shut, hand out? Not for non-profits - what the hell?

Yeah, that might get interesting, come tax time. I'm on the board of a small non-profit and that really doesn't seem kosher.

This should be fine... 20K is about right for the PPP program for 1 employee for 8 weeks at the max 100k/yr salary.  I would expect this to be forgiven if the Organization can submit the payroll reports/940/941 payroll tax filing forms.

Please Note, I'm not saying this is right as in moral. Just saying the paperwork is clean per the current rules of our society.

Dicey

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The key point is they are a non-profit. As I understand it, that's not who the PPP is for. Therefore, unethical. Please correct me if I'm wrong.

Michael in ABQ

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The key point is they are a non-profit. As I understand it, that's not who the PPP is for. Therefore, unethical. Please correct me if I'm wrong.

Nonprofits employee people too. The whole idea is to keep people employed so they don't need to collect unemployment, and so those same businesses can keep running and contributing to the economy. True, a non-profit won't be paying income tax, but their employees still pay income taxes, and they will still generate taxable economic activity with their suppliers, etc.

Not every non-profit is a charity. Many hospitals are non-profits but they're run just like a for-profit business in most cases and usually have hundreds or thousands of employees.

trollwithamustache

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The key point is they are a non-profit. As I understand it, that's not who the PPP is for. Therefore, unethical. Please correct me if I'm wrong.

Non profits and religious organizations are eligible.

I would have no complaints someone wants to toss out "moral hazard"!