The Reality of Economic Dénouement

By Marc Nuttle

Dénouement, the unraveling of a complicated plot to its logical conclusion. Economic dénouement, the unraveling of a complicated COVID relief package. The reality of economic dénouement, the consequences that cannot be ignored in restructuring the American economy.

The above definitions describe the economic dilemma facing the United States today. The U.S. economy is the largest in the world. It is very complicated with innumerable moving parts.

Free enterprise is a complete ecosystem that accounts for the ebb and flow of investments, profits, payments, and bankruptcies, primarily without government support or intervention. The system, like the sun, generates its own perpetual energy.

Socialism, on the other hand, requires constant government intervention and management. As a system, it will not self-regulate or remain in motion without government stimulus.

Every government manipulation of the economy has an equal and opposition reaction on the efficiency of the system and the interconnectivity of the chain of economic flow. The more government intervention, the more problem the system has to be self-sustaining. This is particularly true when the government ignores the impact of the individual intervention on the chain of economic activity.

The moratorium on evictions primarily of renters lapsed Saturday. The outcry from progressives to extend the moratorium was deafening. The face of the issue appears to be a simple matter of humanitarian compassion. It, of course, possesses this emotion. What is disregarded is the necessity of a payment of rent in the overall economic equation of the chain of cash flow.

The landlord requires collections for the upkeep of the property, mortgage payments, and the overall execution of the project business plan. The bank holding the mortgage is not in a position to choose repossession. There are too many properties in jeopardy. Massive bankruptcies will overwhelm the banking system. Bank management is not equipped to manage the properties. If the mortgage falls into default, the loan becomes non-performing. The bank must then set aside further capital limiting dividends.

The landlord needs money to pay his mortgage. The bank needs payments to service the mortgage. Both are dependent upon a renter paying the rent on time.

The Biden Administration defers to the states. The COVID relief package did contain funds for distribution to landlords. As usual, the protocol for distribution was complicated. Paycheck Protection Program (PPP) loans were administered by the Small Business Administration (SBA) through local banks. The plan was designed to be simple. Business owners who could prove they had employees received money. Even then, it took weeks and many conference calls by bank CEOs with the Fed and SBA to confirm the program’s instructions for compliance.

COVID relief funds for advancement to landlords is much more complicated. Banks do not administer the monies. There is no landlord relief agency in any state. The free enterprise system deals with defaulting properties just like businesses in the general economic matrix. Government intervention on one link breaks the economic chain of cash flow.

Business 101 at any university will drive home the point that the central core element of any sound business strategy is balancing recurring costs with recurring revenue. Debt can be a tool if managed properly. However, too much debt will sink any business no matter how viable.

And, so it is with government.

COVID relief rescue packages now exceed $6 trillion of direct cash infusion into the system. Loan guarantees, deferred payments, and debt forgiveness now approaches an additional $8 trillion. New relief packages, including infrastructure expenditures, could take the total relief financing up to $18 trillion. No nation can print and borrow forever.

At some point, economic equilibrium must be reached within the system in its relationship with government management. The money center banks are silent publicly on the proposal of eviction moratorium extension. Rest assured that their opinion has been rendered. Congress’s failure to act on the extension has the large banks’ fingerprints all over it. Most likely they have told the leadership that they can pass an extension as long as the Fed is willing to purchase, through quantitative easing, commercial notes that will surely go into default.

Senator Elizabeth Warren is advocating a moratorium extension without condition. Her clamor for support of renters in absence of overall consideration for the economic chain of cash flow is ignominious. She knows better, or at least she should. Or perhaps, she wants to nationalize the banks.

Troubled Asset Relief Program (TARP) was passed in 2008 in part to shore up liquidity of banks and the western world’s financial system. It was not piecemeal in its approach. It was designed to bring the system back into equilibrium after large packages of mortgages were deemed uncreditworthy. The criticism of the legislation was that it favored the banks. Congress was alerted to the fact that a moratorium extension could put the banks back in the same situation without a comprehensive refinancing policy. Appearing to bailout the banks would outrage progressives. Not dealing with bank liquidity could jeopardize the entire financial system as reminiscent of 2008.

Congress did what it does best. It punted.

It is unfair to the 6 million renters in America, who rely upon government support, to be misled. Doing nothing can cause revolution. Ask the French in 1789. The answer is to tell the truth, seek a new equilibrium for a free enterprise system, and initiate policy that accommodates the survivability of all links in the chain.

Many other countries of the world are in economic despair. Coming next year will be a cry, and then a demand, by globalists to establish a world fund for redistribution of capital to support and underwrite developing nations that do not have the capacity to restructure their economies post-COVID. It is America’s obligation, as a government and a society, to lead the world to a new equilibrium that embraces freedom and the components of free enterprise.

Each and every one of us must recommit ourselves to express our belief to our elected officials that economic freedom is worth whatever sacrifice is required. Taking care of each other, pursuant to each individual need, is not only possible but proven in the American free and open society.

Too much government control breaks the economic chain. Then the government uses those broken chains to make economic serfs of its citizens, in support of the state.

History stands and the generations depend on the coming unraveling resulting in economic freedom.

My name is Marc Nuttle and this is what I believe.

What do you believe?

Marc Nuttle is an attorney based in Norman, Oklahoma, who specializes in international trade, international foreign policy, and international political affairs. He is widely recognized for his expertise in forecasting political and economic trends. He represents corporations, business projects and political entities nationally and internationally. Mr. Nuttle is the founder of the New Horizon Council, a forum for the discussion of transcendent government and business principles.