01
Feb
09

The Stimulus in the Corner

A man I look up to a great deal gave me some advice.  It was the best advice I have ever gotten.  I felt backed into a corner with no way out, so I was complaining and he said, “Why would let someone back you into a corner?  If you live right, you’ll never be in the corner.”  At first, I thought he just didn’t understand that I didn’t have a way out.  Then I realized that I had absolutely gotten myself into the situation and I had no choice but to find a way out, by changing my attitude in a drastic way.  The funny thing is, I don’t even remember the situation I was in.  I just remember this advice and the many choices I have made because of it. 

Our nation is backed into a corner.  Collectively, we were irresponsible and we landed ourselves up against a wall with now way out.  We achieved some financial success, but saw no reason for gratitude.  Instead, we borrowed more to satisfy our every whim.  Then, we failed to hold our leaders to any standard.  In our apathy, we stopped expecting honesty and objectivity from our media.  Now, we have a mess and we need to change our attitude.  Actually, we need to change our entire lives.  Everything needs to be different. 

We’ve been offered a solution in the form of an economic stimulus.  Now the question is whether to take it or leave it.  It is so appealing.  We could accept this solution at little or no cost – right now.  Eight hundred and nineteen billion dollars is so much money.  Properly spent, it could solve all of our problems, to be sure.  What then, would it leave our children with?  The interest alone on this $819,000,000,000.00 is more than we have spent on the war in Afghanistan.  The size of the spending package is equal to the national budget in 1984 and it is two thirds of our current budget, that’s for all government spending.  All of it.  In the ’90’s, a $19 billion dollar stimulus package was on the table and Bill Clinton, not known for fiscal responsibility, said it was too aggressive.  That was less than a quarter of the size of this package just a little over 10 years ago.  This money means $5000.00 for every household in America.  Right now, to fund the bill, every household would have to cough up $5,000.00.  When the nation is paying it back in 20 years, our children will bear the burden of $819 billion plus all that interest.  The tax burdenwill be crushing.  What this means is that this package will create another bubble, tantamount to the housing bubble or the tech bubble, that is destined to burst.  The question is, what will become of the next generation when this colossal bubble bursts?  If we pass this stimulus package, we are keeping ourselves backed into this corner. 

So what if we don’t?  I would love to say that this is a media-induced frenzy, and there is some evidenct to that point.  It is not hard to believe that if the economic situation is dire enough, we will do anything to solve it long before we take the time to truly consider our options.  And let’s be informed.  In the ’80’s, a time that keeps popping up in the media, unemployment hovered around 7 per cent and peaked briefly around 10.  It was believed then that if unemployment sunk below 6 per cent, inflation would run out of control.  Six to seven per cent unemployment was the goal then and that’s exactly where we are now.  We are moving higher, but is that the result of media-induced hysteria?  Everybody I know is employed right now, but nobody will spend.  When spending stops, commerce stops.  When commerce stops, production stops.  When production stops, jobs are lost. 

Also, the housing numbers for December are in.  New mortgages rose by 6.5% in December.  January is proving to be one of the busiest months many in the mortgage industry remember.  Those official numbers will be in within the next few weeks.  Interestingly, this optimistic news did not get a lot of press.  I, for one, am so hungry for positive economic data that I leapt on the news.  I waited for it to be touted near and far, but then, it fell flat.  In fact, to recall the exact figure I had to find the Australian version of the Wall Street Journal. 

Another thing we cannot deny – corporations are still making money.  American business is still profitable.  It may not be as profitable as shareholders and board members would like, but profits are there.  In the ’80’s, a lot of business was not profitable, not at all.  Then, the general population seemed to have enough common sense to understand that some years are better than others.  This was not a profitable business cycle.  This is not where we are right now. 

I have to wonder if our situation merits $819,000,000,000.00?  I really, truly want to believe that it does not.  But I don’t want to be wrong.

So every time I am confident that the media has hyped us to the edge of sanity, I remember the reason we are here.  Hedge funds.  A credit market gone wild.  In the last decade, the United States has lost ground as a producing country.  We offer services, intellectual property, and money.  Even in the beginning, when I was young and clueless, I looked at our credit markets and wondered where the money was coming from.  How, I wondered, did Household credit have enough reserves all of a sudden to loan billions of dollars to high risk customers?  It seemed that every company was doing this and I knew a very small bit about reserves and risk factors and it simply didn’t make sense.  I was 27 when I noticed this, and I was certainly no economist.  SO, how did Alan Greenspan miss it?  How did the OCC miss it?  How did we end up here where are lending institutions have a trillion dollar shortfall in reserves?  That is the crux of the problem, one trillion dollars, or one and a half, but whose counting?  When I remember that huge number, I have to wonder, do we need $819,000,000,000.00?  Possibly.  Should we take it?  Will it make a difference?  Will it make it worse?

It will make it worse.  It may save us now, in the short term, but we should be very concerned about what we are leaving to our children.  If we could find it within ourselves to change our way of life and to change our attitudes, we could keep our children out of the corner.

Advertisements

0 Responses to “The Stimulus in the Corner”



  1. Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


What’s here

SuzyJ’s Tweets

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

Advertisements

%d bloggers like this: