Thread: Credit Crisis Solutions That Should Scare The Hell Out Of Yo

Credit Crisis Solutions That Should Scare The Hell Out Of You

Economics / Credit Crisis 2009 Jan 12, 2009 - 10:03 AM
By: Mike_Shedlock
Economics

Things are looking pretty bleak. There is bad news in housing, the stock market, commercial real estate, jobs, and wages . Unfortunately, no matter how bad things are, someone always comes along to propose a "solution" that is guaranteed to make the situation much worse. Please consider the following ideas.

Scary Idea #1

Anatole Kaletsky is proposing to Punish savers and make them spend money . http://www.timesonline.co.uk/tol/commen ... 469589.ece

Near-zero interest rates and even a tax on bank deposits are necessary to force those with cash to use it productively.

Instead of reducing taxes on interest payments, the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

Good Lord. We are in this mess because everyone (the state, corporations, households) went on a reckless spending spree. There is overcapacity in homes, autos, retail stores, nail salons, restaurants, and damn near everything else. Only a complete fool would propose taxing savings. Unfortunately, I have no doubt Bernanke is playing with this idea in his head right now.

Scary Idea # 2

Obama Says 'If Paul Krugman Has a Good Idea … Then We're Going to Do It' http://www.alternet.org/blogs/workplace/118730/

Today in his press conference, a reporter questioned Obama about Krugman's criticisms. Obama said that he is open to the economist's ideas: "If Paul Krugman has a good idea, in terms of how to spend money efficiently and effectively to jump-start the economy, then we're going to do it."

Last month, Krugman told radio host Bill Press that he is "in communications" with the Obama team.

The Obama Gap

Krugman is writing about The Obama Gap http://www.nytimes.com/2009/01/09/opini ... ugman.html

Mr. Obama's prescription doesn't live up to his diagnosis. The economic plan he's offering isn't as strong as his language about the economic threat. In fact, it falls well short of what's needed.

Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it's able to sell.

And the Obama plan is nowhere near big enough to fill this “output gap.â€

Whenever we think it can't get worse, it does!

We the people, must find a way to take back our government!

What is so bad - the crooks are busy and then we have a tough time figuring out who to listen to. Then how to get the masses to listen and take action is another factor.