We must understand causes and effects if we will ever be able to stage a sustained economic recovery. The banks may have several reasons for holding onto the money tightly but there is one fundamental reason which should concern us: Banks have little confidence in the stability of the job market and therefore in the ability of most people to meet long term obligations.
The unstable job market is a bonanza for corporations for they can dictate pay rates but it has numerous side effects and the one mentioned above restricts the ability of most people to borrow.
Furthermore, people themselves have lost confidence in the security of their jobs. The state government is in the process of dismantling the last bastions of job security which are civil service and teachers tenure but that is a topic for another day.
The insecurity is compounded by the fact that wages have been stagnant for more than 3 decades and banks know very well that people are being forced to meet higher expenses with less money than those of us in 1980, inflation adjusted.
How do we solve the problem? I have a big package of reforms in my program which must be adopted but to make a complicated issue shorter, here are some points:
1. Eliminate property taxes for most homeowners.
2. Reduce the government but not the government that Christie has been reducing which is the necessary government. I would like to reduce the unnecessary government; the huge political class hiding in every crevasse of the government apparatus.
3. Drastic consolidation of government structure. There are between 2000 and 3000 government entities and subdivisions in N.J. It is untenable.
2 and 3 are necessary to be able to do #4.
4. Launching a sort of Marshall Plan to entice industry to return to New Jersey and the only way to do that is to offer these incredible incentives that cancel our higher New Jersey salaries. If corporations start moving back in and small businesses surge, then tax rates can decrease. Remember that standards of living is not your gross pay but what you take home and keep.