Thursday, January 15, 2009

STAGNANT ECONOMY? HERE IS WHY, HOW TO CORRECT IT, AND WHY THROWING MONEY AT THE PROBLEM WILL CONTINUE TO FAIL

The economy is tanking faster than a rock. The government has taken measures to correct the problem but has failed in alleviating the continued fall. As I discussed earlier, liquidity is NOT the problem. The interest rate is NOT the problem because the rate the banks offer is already extremely low. The poor credit ratings for prior loans is not the problem. What is holding up the consumer spending and the release of funds for large purchase items?
The problems are all of these to some degree. And some reasons are not mentioned here for lack of my time to review them. I am just happy to get my damn computer back to blog!!
The SOLUTION may be easier to come by. The solution must address everything or we will never recuperate long term. The solution must be fair to everyone including those who never got mixed up in the first place.
First, the government loaned money to the banks which prevented them from failing. Their failure would have caused total collapse of the financial structure whose implications would have cause 1929 again. Second, the banks need to immediately cut the interest rate on ALL loans already done to half their rate and lock in the rate for the borrower. With everyone in a fixed rate, everyone knows where they stand on payments and the change in the rate will no longer create anxiety. The banks will continue to receive some interest, therefore they will be making a small amount of profit. Since the citizens bailed them out, it's only fair. The lower payments will free up money for the consumer to spend, ending the consumer confidence crisis. Foreclosures will disappear because payments will be affordable to the borrower. The banks will not have to lower the principal borrowed, stopping the fear of loaning more money. Fairness is given to the consumer who didn't get involved by this measure, also. All these things will stabilize the housing price market. States, cities, townships, etc. have lowered taxes on property. This will make higher priced house more attractive to new buyers.
Finally, none of the measures I discussed cause the deficit to grow larger! The positive aspects connected to this are too numerous to list. Tell Obama to stop increasing the debt, start finding ideas that address America's problems without throwing money out the window. A larger nation debt is rucking fidiculous!!

1 comment:

Anonymous said...

Makes a lot of sense to me, why dont you freelance for some of the less liberal papers........or was that a double negative. Thanks for your thoughtful contribution.