Stimulus Plan: Economic Prozac or Economic Viagra

Stimulus Plan: Economic Prozac or Economic Viagra
What will the plan do for a depressed and impotent economy

Compare the metrics today to the Great Depression and it is actually on par much worse. 65,000 jobs cut just this week. There is a lot more coming. I really hate being the bearer of all this bad news over the last year but its reality. The government continues to press ahead with big government bailing out big business, as necessary as most of it is. Now here comes $900 billion more. Will this really stimulate the economy? How long will it take to see these tax cuts work and do we really think passing out economic Prozac in the form of paltry stimulus checks will do anything. The plan will not help companies brace against the problems causing millions to get the ax. 25% of the Bill alone is tax cuts. We must be crazy to mint and borrow more and then at the same time cut our revenue. Simply insane. Plus we all know how many times this longer term money will be stepped on anyway before it ever reaches the ground.


The money in the bill is so convoluted and only about half will actually spur jobs – largely in remodeling and construction. fixing bridges, roads, schools & investing in renewable energy will for sure create jobs. But this is going to take a few years. These jobs also fall way outside many of the unemployed skill sets and even if millions go to work under these programs there will be large scale underemployment. Plus I think we all know how the construction industry works when it comes to big projects. “The Big Dig” in Boston should be a beacon to understand how costly and how dirty hands get into the till.

Lets break apart the many projects being funded under this Bill and you will pull your hair right out. Tens of Billions in special projects, Over $100 billion in State aid. Over $100 billion to modernize schools, all be it necessary, it isn’t what we need immediately to revive the economy. Like I said over half of the money is into black holes and the other half will take quite a long while to get America out of the slump. Without fixing the Consumption Economy watch and see the massive layoffs to come.

I will guarantee you if we do not act immediately for small and big businesses alike, get consumers shored up and bolster confidence the effects of any plan just won’t save so many businesses that are sure to drive America closer to Bankruptcy and a Greater Depression.

EVEN MICROSOFT?

I’ll say it again – If consumers can’t consume our Consumption Economy will fail

Consumption Economy. That has been America’s main economic engine for many years. Consumers and businesses alike are corpses rotting on the battlefield of life and no one is dragging the wounded off the beach. When you see major companies like Microsoft take big hits and start layoffs you know the worst worse case scenario is upon all of us.

For richer or poorer, sickness and health, the American consumer’s marriage to business is ending in divorce and a nasty one at that. How many consumers are knocked out of the economy? Tens of millions. Poor credit, bankruptcy, layoffs.. more and more just eliminated them from the buying marketplace now and for years to come. Yes credit addiction by our government and consumers has gotten us here – but wherever you go…there you are. Unfortunately here we are and without some consumer changes our economy and all sectors will perpetually falter. Just think of how many consumers are locked behind the gates on the Titanic because they are the little guy or poor people. Do we just let them die while executives across the land get the life boats?

Let me use an example. Take a look at retail that I have been harping on for a year. Do you notice all the liquidation sales, super markdowns and blow outs of products. Well they have to. They can’t afford the inventory even if it means little or no margin of the products. Where do you think that is headed? Right down the proverbial toilet. Don’t dare look at airlines, tourism, restaurants and all the many services consumers enjoy. Where do you think those sectors are heading? Right down the proverbial toilet too along with the rest of the economy; cars, boats, RVs, big screen televisions, on-line buying and even the necessities like food, clothes, shelter are shaken to the core. Maslow would be rolling over in the grave.

AMERICA DOES’T HAVE TO SPEND A DIME TO HELP CONSUMERS

So here we go again! What can be done? Big government bailing out big business – it will happen anyway. An $800 tax cut or stimulus check – not this time. Regardless of what we do and how we do it – if we can’t attract and enable consumers to get back to buying every business in America and overseas will come to a day of reckoning and our government is right behind them.

Bankruptcies and foreclosures and 30,60,90,120 days lates should be weighted out of credit scores our minimized based upon the worst economic crisis in America’s history. Either expunge them or get the credit agencies to change how badly those things affect credit in the future. WHY? Because families and people even with great credit can’t get loans and their credit cards and lines are being reduced. How on earth will those with poor credit ever recover and get back to business. Several years of extended pain and mark my words this will crater and bring American businesses to their knees.

Allow a onetime bulk refinancing of all loans and credit so people can stay afloat – and I mean just keeping their heads above water. And like the Titanic example above most of them will freeze to death and surely drown while the rich stay in the life boats and smack the little guys on the heads with oars.

Economy bonds. Instead of paltry checks and tax cuts why doesn’t the government give us economy bonds for some of our taxes – like METHADONE for the credit addicted to start creating a savings nation. That is why Japan was able to stop a banking meltdown a decade ago – because they were a savings nation. Heck the government still gets to use all the money.

If you haven’t read the 10% solution – here it is again – a law for 5-7 years requiring all institutions in the US – to invest 10% of their portfolios into a deficit fund to absorb the US debt and buy back currency. Forget about executives buying back stock in their companies – we need our entire nation to buy back US debt. Don’t you think the stock market will sky rocket? Wouldn’t those investment be tremendously valuable as the rest of the portfolio goes through the roof. A HUGE WIN – WIN!

I may be beating a dead horse – but even if I wind up with a bone dry jaw – I will take that thing and shove it into the watering hole when I get there. If you can’t get the horse to the water to drink in the first place – when we get there we will be sticking bones and carcasses of consumers in there and hope that somehow they will be revived.

Why IS WALL STREET SO NERVOUS

Has Obama inherited a lose-lose situation

Wall Street is up and down like a Yo Yo. Obama faces one of the most challenging financial crises since the Great Depression. And main street is hobbled. Is there any light at the end of the tunnel? The US is bailing water out of the boat but putting debt and newly minted money back into it. I think we all can add that up and come to the conclusion that the boat will still sink anyway regardless of the captain of the ship.

Although big government must bail out big business in order to stabilize the markets and failing banks what will be done for the “Little Guy”. Sending out a stimulus check (Economic Viagra I call it) and slashing taxes for the middle class is not going to buy us out of trouble. Bankruptcy and bad credit assures that many credit addicts that propped up our Consumption Economy from the 1980’s on up to today won't or can't do it anymore. Even those trying to pay bills and are 30,60,90,120 days late assures tens of millions won’t be able to buy stuff the traditional way. Add unemployment, under employment, deficit spending, foreclosures and minting money to the equation and there it is – A more than Perfect Storm.

Some blame the Bush Administration and lack oversight on Wall Street but frankly this issue dates further back than the last 8 years and will project forward for some time. The government couldn’t have possibly projected the blow up of the banking industry acutely caused by the lack of confidence in mortgage products, securitizations and the home market bubble bursting. No matter how much is spent bailing out the financial sector without consumers every industry will be affected; some worse than others. The earth quake deep within the financial sector happened the resulting Tsunami then came roaring ashore and now the water is rushing in and drowning our main economic engine – Consumption.

What can we do? What can Obama and his team pull out of their sleeve? More money? We don’t have it! It’s all borrowed and minted. More diplomacy? Well that won’t solve the waning confidence the world has in America’s economy. Another Great Works program? Under employment is sure to be rampant although the employment numbers will look good. Blame China for currency manipulation? Very dangerous given we need them to buy our debt and they own hundreds of billions already.

I can’t say ouch anymore. The trauma has left all of us powerless and without a voice. Even the economic proposal I have put forth to eradicate the deficit, sell economy bonds (like War Bonds) to Americans, expunging bad credit over the last 18 months and next 12 and a onetime refinancing of debt. All reasonable – and oh did I say it will cost the government on dollar! But like many of us we don’t have the means to change anything. We don’t have a voice that is being heard. Worse even if we did no one is listening to great ideas from the bleachers.

Obama has a full plate for sure. He has a challenge never before seen on our short history globally and economically. I wish us all luck and the President too because one misstep and putting all that debt and currency in our boat is no way to plug up the holes.

The Wizard of OZ: US Pulling Strings Behind The Curtain

The Wizard of OZ: US pulling strings behind the curtain

Don’t we all wish we can go home and get out of the nightmare. The problem is there are no ruby slippers and this isn’t the American dream. Our children are born in debt and a plastic spoon in their mouth.

I wonder if our founding fathers would have envisioned trillions of dollars of debt and much more coming and minting trillions of dollars of new money. They are for sure rolling over in their graves.

Here is a quote from Thomas Jefferson – quite profound “I sincerely believe ... that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.”

Sound familiar. It is. How can we continue to survive as a capitalist nation if we are gambling everything on the future prosperity. When is enough – enough – and the world looks behind the curtain and just sees a house of cards. History will show that the time the US started its decline was when we shifted away from the Gold Standard. There as so many quotes from ages ago around the issue that I got tired of reading them. It is a crystal ball into our future and it’s all coming to roost now. It’s not roosters we should be wary of it’s the foxes that already ate them all.

So it appears the solution is spend, borrow and mint money like there is no tomorrow and frankly there isn’t. We are in big trouble let me tell you right now. Not only has our economy received the one – two – three punches but we bet on ourselves to win. How can we possibly play Russian Roulette and not think the bullet is going to hit us. The Wizard of OZ was feared, adored and turned out to be the man behind the curtain and the loss of his identity in that moment was devastating at first but in this case the American Dollar, Treasury Auctions, Debt skyrocketing we won’t be as lucky if the curtain is pulled off.

DO YOU THINK ITS BAD NOW - WAIT FOR THE HEDGE FUND CLIPPERS

Trillions invested in high flying Hedge Funds will get a buzz cut in 09

I bet many didn’t see this one coming! Worse many don’t even know what the heck it is.

Hedge funds represent over $ 2 trillion invested in the financial markets. So why do we care? Do you recall Long Term Capital Management (LTCM) that collapsed due to exposure to the Russian market in 1998. It rocked Wall Street to its core and the US had to step in and loan them $3.65 billion to keep them alive long enough to liquidate. The problem is today these funds have huge influence within the stock market and investors are screaming for their money back. That is very bad and worse most of the funds are down 30- 40 - 50% or more. The industry is being pushed right off a cliff and managers with billions of dollars invested cannot give investors their money back. Here it comes again - once the investors start screaming to get their money back and the roared loudly last year it causes a vicious circle that causes more panicked investors to ask for their money back too. Like the run on Washington mutual. I will predict now that at least $500 billion will get sucked out in 09 – and the only way to suck it out is to sell it off. What happens if there is a major sell off of stocks and bonds – you know the answer. And it is coming.

We have seen the bailout of our financial industry and the cratering of the stock market and yes I am afraid there is another big boot to drop at the worst time in history. It is projected that at least one third of them will go under. And now for the real treat – these funds have invested heavily in mortgage backed securities (MBS or CMOs), collateralized financial obligations (CFOs) and collateralized debt obligations (CDOs). In fact the rating agencies have already begun to downgrade the instruments just waiting for the Hedge Fund shoes to drop. Over $600 billion is already being set aside to brace for impact although the car already went off the cliff.

If the collapse of LTCM was horrifying back in 1998 what do you think the reaction will be knowing it already began last year? I will predict right now that the huge failures in the Hedge Fund industry will make LTCM look like child’s play – just start counting the numbers from 2008 alone. Q1 and Q2 we will see a run on many of the hedge funds and this just will throw gasoline on an already shaky market.

Many people except insiders have paid much attention to this but I think everyone needs to know when the fan is about to be hit with you know what.

Economic Viagra: Stimulating the US Economy

Trillions of new spending + Trillions added to the deficit over the coming years

Face it America is on its back and largely impotent to change our economic woes anytime soon. All the stimulus packages being flaunted around DC may have a near term jobs increase which is much needed but at what price. First the Fed, economists and our leaders all are now predicting the US economy is going to be terrible for the next few years if not more. I hate to be the one to tell you the writing was on the wall a year ago when I started to RANT about this doomsday. Second, the solution being offered is to print money 24-7, borrow huge sums of money from around the world and spend the borrowed money like crazy to stay afloat. Well wasn’t that what got our financial industry into trouble in the first place.

With certainty our politicians are telling us that we will be racking up trillion dollar deficits annually for the coming years. Also, the US is printing so much money now that I predict inflation will be a huge factor in perpetual stagnation of the economy. Add in unemployment, underemployment, bankruptcy, foreclosure, bad credit and so on. With that and not going into detail America on the whole and our states, municipalities’ and industry after industry are bankrupt. If they haven’t declared it yet – they will. How does that look for future bond offering or raising capital or working with the already risk adverse banks. You got it – very bad and the result – even if they can get the money it will be at a very high price. A rat on wheel. Even worse when does the world stop using our devalued currency for trade. When does the world cut us off by not buying our debt or worse selling off huge pieces of our debt or currency on the open market. I can’t believe it hasn’t happened yet but I think the final blow will be such a scenario.

It sounds dark and gloomy and it really is. Perfuming this pig is what has been done over the past decades and now the pig is laying hobbled in the Serengeti of life and we all are too. Regardless if you are financially stable many other consumers in the market aren’t. Whose fault it is doesn’t matter at this point because wherever you go there you are. We all know the affect of bad credit, bankruptcy, foreclosure and late payments. This fact will knock probably half of American households from aggressively participating in the US Consumption Economy. So no matter what we do we remain impotent as long as the economic base of our economy remains hobbled. So what do we do?

Well I have said and will continue to hock my simple ideas.

1. Expunge late payments from consumer’s credit for the last 18 months and next 12 months for only those trying to pay their bills. This is an obvious psychological relief for tens of millions and also will allow those households to be a part of the economy down the road without paying huge sums of money for credit just to buy things.
2. Allow a onetime refinance for every household to consolidate all their debt so they don’t go bankrupt and have the things above happening for long periods of time. The government should have an insurance program to support the consumer’s loans but not spend any money to bail them out – sounds reasonable doesn’t it? Since it’s the underlying issue that is causing so many bank portfolios to crater. This alone would be a huge boon for the housing market, banks, mortgage companies and many more.
3. The deficit. I hope many people are reading I owe US NOT! On my web site but we can enact a law requiring that 10% of the portfolios of all pensions, unions, 401k’s etc.. be allocated to buy back all US debt. This would have over 10 trillion of new money available – and has to be 100% used for the deficit. This would cause our financial markets to skyrocket and no one gets hurt. I can go into more detail but there is a #1 trillion dollar credit investment the US can make by buying zero coupon bonds thus guaranteeing the money is repaid over 10 years. This is fundamentally a game changer for our country.
4. Sell Economy bonds to only US citizens – after all this Economic War isn’t it.

I can go on and have on many radio shows but the fact is we are in big trouble and we need to think of many different ways aside from just throwing money down another black hole that we don’t have.