With the rush of government funding to small businesses through the Paycheck Protection Program (PPP), Emergency Injury Disaster Loans (EIDL), and Main Street Lending Program it could feel like the business capital environment has been flooded like a rice paddy!
The unprecedented move by the government in concert with the Federal Reserve was remarkably quick and relatively smooth once the expectations from both borrowers and lenders were further defined.
However, there is no denying the uncertainty of injecting over $2.2 Trillion dollars into an economy. Money supply theorist scream that inflation will overtake any solace direct cash payments provides to the economy, and bullish economists argue that our consumer-driven economy would collapse if not for some type of government intervention.
So, using our rice paddy as an analogy, what is the benefit of flooding the field?
Killing off the Weeds
Instead of using harmful herbicides or tons of manual labor, farmers flood rice fields to inhibit natural growth of weeds in the soil. In context of the CARES Act, this flooding of money to businesses to incentivize keeping employees on the payroll helped stem the psychological affect employment has on a consumer economy. If consumers feel that they or the economy as a whole, are at risk of losing their income either through a furlough, layoff or downsizing, they pull back on spending. This causes a cascading effect throughout the entire economy and further exacerbates the downward spiral. The stimulus provided a cushion for both businesses and individuals to stem off the encroaching weed of unemployment and maintain the growth of the field.
A Symbiotic Relationship
For the rice paddies, many farmers also put small fishes in these fields. These fish form a symbiotic relationship with the rice environment by eating harmful pests while also fertilizing the soil and keeping an oxygen balance in the water. This was the second part of the CARES Act where common citizens received a direct cash payment and the opportunity to collect improved unemployment benefits. This allowed for the consumer activity to stay relatively the same as if there was not a lock-down. It proved to work. While there was an initial shock due to the uncertainty of the pandemic, the cash on hand by consumers helped ensure the recovery and keep the balance of the economy.
With all the benefits of flooding a rice paddy, why not just throw more money into the system? It turns out, the amount of flooding on rice paddies is a science and calculated through a variety of variables including percolation, soil seepage, and more. Too much water and the farmers could lose the entire crop!
Now that the initial funding is all but gone, what is next for businesses? With some talks of another stimulus, additional support may occur but to with much more specificity.
While it was nice enjoying the small reprieve of a forgivable capital infusion, businesses will still need working capital to work through additional delays. Call Camel and to see how we can work with you to develop that symbiotic relationship to keep growing!
From Helena’s Garden: Although I don’t grow rice (Would be kinda tough in my suburban neighborhood) Several of my Sopwith relatives are rice farmers in Sacramento. So in honor of them I have chosen National Rice Month. My recipe does include cilantro which I try to grow in my garden.
CILANTRO LIME RICE
- 1 Cup of your choice of rice
- 2 tablespoons olive oil
- 1 minced scallion
- 1 clove minced garlic
- 1 lime
- Handful of cilantro
- Sea Salt & pepper
- Red pepper flakes
- Start by cooking your choice of rice on the stove or in a rice cooker.
- When the rice is finished cooking, mix it with minced garlic, scallions, and lime zest while it’s hot.
- Allow it to cool slightly, and then add olive oil, sea salt, lime juice, cilantro, and red pepper flakes and pepper if you like your rice spicy.
- Serve it as a side dish or use it as a component in your favorite burrito bowl!