Stimulating the Economy
Stimulating the Economy
I’m amazed at the response our Administration and Congress have taken toward news that the economy might be in trouble. Their idea is to write a bunch of checks to spur consumer spending. Tha
I'm amazed at the response our Administration and Congress have taken toward news that the economy might be in trouble. Their idea is to write a bunch of checks to spur consumer spending. That's dumb.
Maybe it's a good sign, that after so many years of trickle-down monetary policies, they are starting to think in Keynesian terms, priming the pump. But encouraging gratuitous consumer spending is not the way to do it. Consumer spending is the problem. We've already done way too much of it, financed by phantom real estate values and bogus loans.
What are folks supposed to do? Spend it fast, say the architects! Well, to the extent that it gets spent at Walmart, it's going to help the Chinese economy at least as much as ours. It helps them twice: Once when we borrow the money and again when we buy their goods.
If folks are prudent and pay down some of their debt, it will help repair the root problem, but it won't stimulate the economy. Encouraging productivity and savings is what the economy really needs, but putting it in savings will have no short term effect because banks are going to be stingy with their loans after taking such heavy losses.
Of course, if our government was serious about saving the economy, they'd pull the cash hose out of Iraq and start pumping it back into our tank. That's simple, but easier said than done. Last time around, we poured money into public works projects, making lasting investments in infrastructure, the wisdom of which we still enjoy. But that takes a lot more than we have while we're still waging war. So if Americans are only going to see a few paltry dribbles, what should we do?
Pour it into small business, the backbone of our economy! All across the country there are Business Development Centers associated with University Business Schools, affiliated with the Small Business Administration and already networked with powerful mentoring skills in their community. They field scads of decent business proposals every day, many of which will never be funded because the proponents do not have access to the minimum capital requirements.
If each business center identified their top several unfunded proposals, targeting value added production and job creation, then we might actually get a bang for our buck. Those that go on to fail would still serve to produce the needed short term spending, and probably not at Walmart. Those that succeed would truly bolster the economy with lasting effect. And no one will work harder than those starry eyed entrepreneurs!
What's most amazing to me is that our erstwhile elected representatives didn't even consider it!
Maybe it's a good sign, that after so many years of trickle-down monetary policies, they are starting to think in Keynesian terms, priming the pump. But encouraging gratuitous consumer spending is not the way to do it. Consumer spending is the problem. We've already done way too much of it, financed by phantom real estate values and bogus loans.
What are folks supposed to do? Spend it fast, say the architects! Well, to the extent that it gets spent at Walmart, it's going to help the Chinese economy at least as much as ours. It helps them twice: Once when we borrow the money and again when we buy their goods.
If folks are prudent and pay down some of their debt, it will help repair the root problem, but it won't stimulate the economy. Encouraging productivity and savings is what the economy really needs, but putting it in savings will have no short term effect because banks are going to be stingy with their loans after taking such heavy losses.
Of course, if our government was serious about saving the economy, they'd pull the cash hose out of Iraq and start pumping it back into our tank. That's simple, but easier said than done. Last time around, we poured money into public works projects, making lasting investments in infrastructure, the wisdom of which we still enjoy. But that takes a lot more than we have while we're still waging war. So if Americans are only going to see a few paltry dribbles, what should we do?
Pour it into small business, the backbone of our economy! All across the country there are Business Development Centers associated with University Business Schools, affiliated with the Small Business Administration and already networked with powerful mentoring skills in their community. They field scads of decent business proposals every day, many of which will never be funded because the proponents do not have access to the minimum capital requirements.
If each business center identified their top several unfunded proposals, targeting value added production and job creation, then we might actually get a bang for our buck. Those that go on to fail would still serve to produce the needed short term spending, and probably not at Walmart. Those that succeed would truly bolster the economy with lasting effect. And no one will work harder than those starry eyed entrepreneurs!
What's most amazing to me is that our erstwhile elected representatives didn't even consider it!
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