Reply #2: This has all had me thinking.... [View All]

when you operate a business where you have to smooth out rapid fluctuations in cash flow (trucking/shipping is a big important example), you've got basically two approaches to choose from:

(a) you can maintain a cash reserve, and draw it down temporarily, and get paid back.
(b) you can maintain a line of credit, draw on it temporarily, and pay it back.

What's interesting is that to a first approximation, it seems that all businesses have gravitated to (b). I don't really have a moral problem with (b), but we sure are seeing the vulnerability of an economy that mostly uses (b) compared to an economy that mostly uses (a).

It also shows how little actual planning has happened in terms of economic policy. In some fictitious world where our fearless leaders took their jobs as economic stewards seriously, some team of economic wonks would look around, and say "Hey, I see that structurally we have a "type-b" economy. That means we should either take steps to move us more towards "type-a", or alternatively we should make very very damned sure that our credit-markets are bomb-proof."

Clearly, neither of those things happened, and even after the bomb went off, these people showed every sign of not immediately understanding the implications for our type-b economy.

Bummer.