Fixing What Ails Us

Here we sit several months since it was determined that the federal government needed to infuse the US economy with some corporate welfare into the banking system rather than tax cuts, business incentives, pork projects, work programs or more rebate checks. The pocket change handouts given to the public was nice but lasted only until the next credit card payment was due.

Now we have to go back to the basic Economics 101- Money is the core of an economy. Right now the "De-leveraging" has removed a huge hunk of money from the economy as a result of lost equity (both stock and housing) resulting in not enough to go around. The value of overall equity is down about two trillion bucks as we speak.

The federal government's only tool to fix what's gone bad is to add money to the system. This could occur in different ways, the most immediate effect of course is by force feeding lending institutions with $800 billion or so to jump start the increase in the "velocity of money," (velocity is that which actually drives the system)- More velocity- Better economy. Increasing the velocity of money could also be accomplished by creating jobs as in Roosevelt's WPA program in the 30s but that would take way too long to have any material effect- Took almost 7 years during the depression of the 30s- World War II finally got us out.

To put a brand of "socialism" on the distribution of money process is truly simplistic. The very existence of government is socialistic. Market dynamics cannot work without a centralized force to stoke the fire when needed. Obviously the value of currency will be affected negatively in the process but the alternative is totally unacceptable- We can see that aspect right now.

Unfortunately, doling out mega-bucks to fat cat bankers is nasty business. We saw first hand what happened to your tax dollars as the largess took place- The goobers gave themselves huge bonus payments and scheduled "retreats" to ultra high-end watering holes. The chief goober at Merril Lynch decided his office needed stuff like an $84,000 rug and a six figure furnishing arrangement. No doubt about it your tax money passed out without restriction WILL be squandered to a great extent. Trying to control the process is like it was 30 years ago in trying to establish price controls. You can control certain aspects like President Obama has done with limiting executive compensation to $500,000 for corporate recipients of TARP funds but the fat cats will easily find an end-around to that process.

The banks that have received money are bolstering their shaky loan portfolios rather than pushing it back into new lending. As long as this is the norm, TARP will have little or no effect. How do we force banks to lend? The bailout of General Motors needed to happen but the act was distasteful at best. The last thing the country needed was hundreds of thousands of GM workers and related industries and their employees folding their tents when demand for such products evaporated.

Depending on a totally botched lending system headed by clueless leadership to bring about recovery is not the answer. There are thousands of financial institutions in the country that did not offer sub-prime mortgages. They are now taking a hit because the loans that they did make are not being repaid since so many of their customers like small businesses have failed and too many workers are unemployed and are unable to repay loans.

So what's the solution? The immediate shot in the arm may be like castor oil but could be the best tonic. Infusing the public with a dose of cash could have the best overall benefit to the country. If one took a look at the $850,000,000,000 being dumped into a failed financial system and instead had distributed those funds to each household in the country that money would have been put to work immediately. Loans would be paid, expenditures made for autos, refrigerators and houses and investment- Values would increase. The American consumer puts over 60 percent of the US GDP on the ledger. The consumer is our leadership out of the mess the fat cats created.

This alternative makes a lot more sense than giving corporate welfare payments to those that just abuse the American public some more. Call it whatever you want- It's still corporate welfare.