Bailouts, Stimulus Plans and the Economy

November 14th, 2008

There should be a wider debate on economic principles and what the role of government is. We’ve become confused about the role of government in the economy - and the role of individuals and corporations. This is a big debate that isn’t taking place at the forefront of the media. Instead, the media is too busy talking about what the government can do to fix these economic problems - but they usually focus on “fixing” the symptoms, instead of focusing on the real problem; An economy financed on debt is unsustainable and only masks the true problems of competitiveness and sustainability. We should not be relying on consumers’ spending of debt dollars in order to be economically prosperous! No amount of government bailouts, stimulus packages, or increased taxation to allow more government “spread the wealth” programs, will ultimately deal with the underlying economic issues.  They only mask the issues and lead to greater problems in the long haul by delaying the economy from answering them. We need to become competitive again through innovation, invention, progressing technology forward, increasing efficiencies, etc, etc, if we are to solve our economic problems. Debt can now be added to a long list of our economic problems. This process will not be short neither will it be painless, but it is necessary.  In the fight of ‘Government vs. Economics’ - I pick Economics as the ultimate winner.  Yes, the government may appear, at times, to be winning - But it can’t fight the Economics forever, in the battle of attrition, we know who will win.  Fundamental economics has a greater endurance (forever, infinite) than a political agenda (set by politicians and governments of the day).

• Jeffrey Christian on why Gold and Silver could spike up.
• Bailouts Must Be Odious.
• 10 reasons to be positive about the stock market!
• More on the Deflation versus Inflation debate…
• Jason Hamlin on China Shifting Reserves to Gold and Hyperinflation.
• Should we bail-out the big three automakers? There are 300+ comments already!
  

  My Take: Tesla Motors has created the Tesla Roadster - 100% electric, 244 miles per charge, 0 to 60 in 3.9 seconds, costs only pennies per mile, all for $100,000 (and that could come down if they were mass producing - they only build 1,000 a year!). Why can’t the big three compete? Innovate!!!

• I hope we have seen the last of the stimulus and bail-outs, but I have my doubts due what people believe (government, please save us! hahahahahaha). Yuck!
  

  My Take: We don’t need government stimulus. Things will turn around, they always do. The problem is we, as consumers, are too leveraged and have too much debt at the moment. We’ve spent money we have not yet earned - and now we are beginning to realize we’ve taken on too much debt, and we are going to spend less until we have paid for what we already spent!!! Debt hid our problems during the “good” times (where we were taking on more of it!) and will make the bad times look worse (while we pay down some of it). Ultimately, things will turn around, but it will take time (perhaps a decade - as that is about how long it took us to get into this mess) and it won’t be painless.

  This debt burden that we now have at one time helped mask the true problem: America is no longer economically competitive. The taking on more and more debt was unsustainable. America is no longer competitive nor was this debt accumulation sustainable. Now we have to face reality and get back to competing and using our brains instead of other people’s money. How is burdening the Federal Government (and every citizen) with more debt going to help the sustainability and competitiveness of this economy??

• What do U.S. Policy Makers Know?
  

  My Take: The “policy makers” are the problem. Of course they make it up as they go! People now cry to the government when they lose their job! So they want the government to do something, so the government does something - not that it works or makes any economic sense…

  Perhaps debt and interest rates shouldn’t be core objective - An economy financed on debt will ultimately fail. It is unsustainable. So anything to do with interest rates is just a futile effort to get people to take on extra debt to mask the true problem with the economy, competitiveness.

• Tony D’Altorio on Great Expectations of Obama, but not the Economy.
  

  My Take: Society has went toward one that begs government to solve it’s problems as if government has all the answers. So government politicians are pressured to “do something”. With Obama entering the Whitehouse, it’s no wonder corporations are lining up for cash… they can smell some free money - and if enough of them cry loud enough - they might just get some. I hope it doesn’t happen - but Obama was in favour of the bail-out… so why wouldn’t he be in favour of more? That’s the answer government has - bailouts… so we just need more bailouts if they are correct, pepper in some stimulus packages and some tax increases to give the government more money to spread around to solve all these pesty economy problems. It’s so wrong!! Bailouts don’t solve the underlying problems.

  Bail-outs, Stimulus packages, reduced interest rates, etc, etc… All of these proposals only deal with masking the symptom - that spending in the economy is declining - but fail to address the underlying problem that has created the symptom - The economy isn’t competitive and is unsustainable. We’ve taken on too much debt! We hid our problems for decades by taking on debt and spending it, as if it was already earned - but consumers have realized they need to pay some of these debts off…

  No politician that promotes bailouts or picking and choosing winners with unearned money, will solve the problem. The economy is not sustainable nor is it competitive. Unless these issues are addressed (and I don’t expect them to be), I really can’t see what it is people hope can be accomplished by “spreading the wealth” through more stimulus packages and increased taxes. Those only further mask the true problems. But I have no fear - in the fight of Government Vs. Economics - Economics will win in the end. We will, eventually (might take decades), realize that we need to be more competitive (and innovative/inventive) and less reliant on consumers spending debt dollars if we want to be sustainable.

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