Kevin O'Leary warns chaos is about to begin for US economy: 'Wake up and smell the roses'

Shark Tank' star says September could bring liquidity crisis for small businesses

O'Leary Ventures chairman Kevin O'Leary is warning that the economic policies of the Biden administration are about to put a significant squeeze on small businesses.

The "Shark Tank" star joined "Fox & Friends" to warn that the month of September will usher in a chaotic time for the economy due to high interest rates.

"We've got the CHIPS and Science Act. Where's that money going? Behemoth giant companies in the S&P 500. The Inflation Reduction Act, another trillion not even printed yet. All going to big guys. Now, that's great. They represent 40% of the jobs in America, the S&P 500. Everybody knows the S&P 500 is the biggest index in the world. But 60% of America is small business. That's where 60% of the jobs come from. We've given nothing to them. And so they're struggling because the Fed is raising rates up to 5.5% in a matter of months." 


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Although the U.S. economy has seen some respite from record inflation, O'Leary has been warning in recent weeks that there is a "crisis emerging" for U.S. small businesses. O'Leary recently traveled to Capitol Hill to talk to "everybody" he could, cautioning about a liquidity crisis.

"We have a crisis emerging. … I'm talking about companies with five to 500 employees, which represent over 60% of our economy," O'Leary said. 

"If you're in the S&P 500, you have no trouble financing your business. You can't say that about small business anymore. The cost of capital has gone through the roof."


He said small business owners will be "cut off at the regional bank level."

"They're not lending. The loan books closed down. The rates that he pays for money have gone from 4-5% to 11-17%, and we're not talking about them. But you're going to hear a lot of people crying about this in the next few months." 

placeholderO'Leary warned that currently there are approximately 4,100 regional banks and this will go down to 2,000 in the next three years, leaving people worried about putting their money in banks. 

"During that period, people are very nervous about putting their money in the bank. Because if another one fails, and you have your cash in there right now, you're only guaranteed for 250,000."

O'Leary suggested extending the employee retention credit for small businesses.

"That's the deal where companies that invested in their employees during the pandemic are getting to take back a grant for that," he said, emphasizing the need to "wake up" and better support small businesses that provide "60% of jobs in America."

"Shark Tank" star Kevin O'Leary testifies

O'Leary Ventures chairman Kevin O'Leary issues a warning about a 'big problem' in the U.S. economy. (Ting Shen/Bloomberg via Getty Images)

"Meanwhile, we're going to write $2 trillion to the big guys. That in itself is inflation. But it seems unfair to me to support a behemoth company that has a lot of its employees outside of America and not my company's small business."

In the National Federation of Independent Business (NFIB) Small Business Optimism Index, released Tuesday, small business confidence rose by 1.6 points to 91 points, Reuters reported. The June report shows confidence is at a seven-month-high.

While the data suggests small businesses are optimistic, O'Leary pushed back on the notion that all is well.

"I'm in the real world talking to CEOs of small companies that are family-owned in America, in almost every state, every day. They're not happy either. So I'm not listening to that data. I'm dealing with reality," he said. 

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