The premise for PPP: you borrow money for your business to keep it afloat. Otherwise, tons of businesses will close and the overall costs to the country will be even higher. Specifically, PPP is meant to prevent interruptions in payroll.
The reality: many businesses are borrowing money they’ll never have to pay back to pay for things that aren’t essential.
How Scams Happen
This first one isn’t even a scam. There’s simply no verification happening for a lot of forgiveness applications.
Case in point:
“No proof required.” This is not an attack on the individuals in this post. As far as I know, they’e done nothing wrong.
However, their experience illustrates the insecurity of the system we’re all sponsoring.
Even if you were to provide proof, the qualifications for forgiveness are incredibly low. According to the SBA, 60% of the PPP loan had to be spent on payroll (the stated purpose of the loan).
Did you catch that?
That means you can spend 40% on whatever the hell you want and the taxpayer will foot the bill for you 🙂
Make No Mistake, You are Paying
“But the government is paying?” No, you are.
- You’re either paying directly through increased taxes (taking money from a different tax you already pay). But the governmetn is already in debt, so this won’t work.
- We all pay more through inflation. The government “printing money” doesn’t create wealth. It just dilutes the currency.
If there are 10 things to buy, and only $10 to buy them, each one will go for roughly $1.
If there are 10 things to buy, and only $100 to buy them, each goes for $10.
Adding more dollars doesn’t create more things to buy. It just dilutes the savings of anyone who has been faithfully saving money, and makes things like houses harder to buy.
Now, do you think it’s okay for a small business to have 40% of their “loan” as a slush fund (which they’ll legally never pay back)?
So what? And what should a smart business do?
Honestly, this situation messes me up because it’s indicative of a nation with morally bankrupt leadership.
This shit is pure tragedy of the commons. We’re all pulling from a resource because everyone else is pulling from the resource. I am literally trying to decide myself if I need to do one of these loans and arbitrage the cash before inflation takes it all.
You’ve got two toptions:
- Take advantage of the situation yourself. If the ship is sinking, when do you stop bailing out water and just try to grab some of the valuables being abandoned? That’s the question for a currency about to experience massive inflation.
- Remove yourself from the risk. This doesn’t mean leaving the country, but squirreling away your cash into hard assets like real estate, stocks, or more appropriately, Bitcoin.
Is it unethical to get a PPP loan yourself and plan to not pay it back (and get free cash in the process)? I don’t know. It doesn’t feel good. But I also understand wanting to convert a dying currency (fiat) into a real asset (like real estate or Bitcoin).
Not going to make that decision for you. But you deserve to know the lay of the land.