The Whole Mess, And What To Do About It, part II

In the first part of this series, I described (as best as I could make the words tell it) how the current economic FUBAR we find ourselves in came to pass. Now, for reading all of that drivel, I give you my plan for fixing said FUBAR.

Well then, here we are… the banking world in tatters, and people holding on to their money for fear of worse times to come. Which brings me finally to my plan: The two things we need to do and do immediately are 1. Get the banks lending again and 2) Get people spending money again.

Bank loans are the life blood of business, especially small business. They need them for payroll, inventory and for other expenses. But many of the banks’ assets are so damaged by the MBS collapse that instead of lending they are holding onto their cash to cover their own liabilities. This hurts business and the banks themselves, who need to lend to make money. Therefore, instead of just buying stakes in the banks or loaning them more money, the government needs to convert the TARP fund into a buyback fund for bad assets to remove the bad assets from the banks ledger and give them liquid cash to lend, and we need to stipulate that the money must go to lending and not to internal expenditure. If the bank doesn’t agree, it is left to its fate.

And to get people spending again we need to boost consumer confidence, much like the banks they are “hording their cash”. So, the government should not make them wait for some spending program that might take two years to see any benefit, Uncle Sam should give the people an immediate tax holiday…no payroll taxes for 2 or 3 months and watch my materialistic brothers & sisters get the gears of capitalism moving again. Also, why not cut the corporate tax rate (ours in the US is among the highest in the industrialized world) to give business a little breathing room to grow and create wealth & jobs.

Congress, by borrowing & spending on useless projects, is mortgaging our kids’ future with a debt we can’t afford to repay. Haven’t we learned anything about debt from this current crisis? Eventually, the government will be forced to raise taxes or print more money to pay off this gargantuan debt, either of which will only serve to deepen and lengthen this recession. Or worse, push it into the next depression. Learn from the Great Depression and the 1990’s economic collapse in Japan: Unemployment and temporary aid are fine, butthe government can’t spend us out of a recession or depression. However; if it will get out of our way and let us…We The People can.



Nolanbuck