Tag: Economic Stimulus

Will US Have a “Lost Decade”?

If you have been watching the economic drama unfolding in this country then you have heard terms like “Lost Decade” and “Zombie Banks”.  But just what is meant by all this?  Let us look at the 1990’s in Japan.  A little knowledge of history can go a long way at preventing a totally wasted period in American economic activity.

Beginning in 1991, Japan experienced a financial crisis that has been documented and studied by many. Japan’s crisis was triggered by a real estate and equity price bubble followed by a collapse of equity and real estate prices. But unlike the examples I cited above, Japanese policymakers met the crisis with prolonged denial and then, when conditions forced recognition of the severity of the problem, very halting steps to address it. Banks were not forced to recognize the condition of their balance sheets and were encouraged to continue lending to firms that were themselves unprofitable. Anil Kashyap labels these “zombie firms.”

Zombie banks continued to direct capital to zombie firms. This charade continued for more than a decade, with the result that the once-powerful Japanese economy was completely stagnant for that period. The government’s main response was to dramatically increase spending on infrastructure and frantically try to get Japanese households to save less and consume more. The resulting “lost decade” of economic growth cost Japan more than 20% of GDP.

Does any of this sound familiar? Can you connect the dots? As we wring our hands about getting more involved in the financial sector and saving the jobs in the auto sector, and as we watch the many inefficient industries line up for help, it behooves us to ask: Which of these are zombies? If there is one lesson that seems to leap out at us, it is that, however great the short-term costs, the costs of keeping zombies alive is much greater. With stopgap measures in place, designed as much to sustain the zombie illusion as anything else, it becomes harder and harder for legislators to tap into the political will for painful but essential remedies.

So far all the government is doing is looking like the same thing Japan did…throw money at institutions that are already dead.  I think the American people are starting to realize the fact that these institutions are dead and it is time to let them be buried.  It is costing way too much to keep practicing the “voodoo” of economics trying to secure something that cannot be.

What A Difference A TALF Makes

What the hell is a TALF?

TALF is Term Asset-Backed Securities Loan Facility (TALF).  It is Bailout #2, which consequently will not be tapped from our pockets rather from printing of more money, is known by some as the consumer bailout, and also a refocused plan to more-so help financial markets dealing with consumer asset-backed securities like auto loans, credit-card debt, and student loans. The new consumer program will allocate $200 billion by the Federal Reserve to security holders of consumer backed debt, essentially doing this will insure the debt if a borrower defaults. And backing the backers, the Treasury department will provide $20 billion from the $700 billion from bailout #1 funds to safeguard losses the Federal Reserve will incur.

Basically, a pool of cash to be used to assist car loans, home loans, etc.  This is a lame attempt to try and create demand.  The problem with this plan is what good is a pool of cash when so many are unemplyed?  These people will will not qualify for a home loan or a car loan….so what is the TALF for?

Just another attempt to save Wall Street.  The people are suffering and the answer to that is more cash to help the business biggies survive.

Hurry! Save The Banks!

Since the very beginning of the economic crisis and then the bailout process it has been about saving the banks, because “they are too big too fail”.  Dollar after dollar has been thrown at the banks in question and what has it accompliushed?  A damn fine question!

The Congress and all concerned are throwing this money at the banks with the hopes that it will prop up their bottom line so that they will once again start loaning money.  In essence they are trying to improve the bank’s liquidity.

Good one, guys!  But answer this–what good is liquidity if there is NO demand?  Why would banks loan to companies if no one is buying their product?

Let us take it further.  There is NO demand!  Until demand can be created banks will NOT loan money to anyone.  The only economic activity right now is between banks, because they are too big too fail.  The banks are being saved—they are NOT saving jobs–They are NOT creating jobs–they are NOT loaning–they are doing nothing.  Wait!  That is a lie!  They are investing overseas and Citi made a profit.

Profit?  Does that mean the government can expect a check?  Doubtful!

One more time!  If demand cannot be created, then liquidity means squat!

We Do Not Want Your Money

That is what several governors have told the Federal government, most of them in the South and Repubs, but why would a governor not want stimulus money to help his/her state?  Well, some say that it would put a strain on their budgets in the future.  Or maybe it is the red tape involved.  Or maybe it is because it is coming from a Democratic pres.

There has not been a definitive answer to why they do not need or want the cash…but with a little reading and research there could be an answer…..

The buzz grows surrounding the possibility of a second massive economic stimulus package, President Obama and Vice President Biden warned state officials yesterday to spend their shares of the approved $787 billion wisely – or else.

“If we see money being misspent, we’re going to put a stop to it,” Obama said at a daylong White House conference on the recovery package.

With that one statement it could explain the hesitancy of the governors to accept the cash.  It must be spent for the good of the state…not put in some “general fund” to be pissed away like so many other funds that some of the states receive.

Could it be that the governors are afraid of the word “transparency”?

I did find one thing that caught my attention.

Some state officials expressed confusion about what role they will play in passing on stimulus money to cities and towns and what reporting requirements they’ll face. They also complained that there has been a lack of communication about projects that have been announced.

This is a good possibliity, especially in my state of Mississippi, where we have the absolute worst system of record checking….another good way to piss money away …if no one can check where it goes…..

These governors are NOT acting in the best interests of their states and its people.  They are playing politics…in a tiome when politics should be the furtherest thing from their minds.

Tax Cuts? Tax Cuts!

Oh crap…..we are still singing that tired old song?  Repubs have been rattling this piece of crap since 2001…it promises jobs and growth and …and….and….well just about anything you want it to; but what does it really bring with it?

Not much that it promises.
What did the Bush tax cuts really bring forth?

unemployment was up

opportunity was down

poverty went up

income went down

anxiety went up

prosperity was down

And yet with all that, the Repubs just keep throwing the failed policies of the past into the fray of any stimulus plan..  Why?  That is an easy question to answer.  They have NO plan B to offer the people or to save the economy.  And yet again they keep winning elections with no plans for the future other than to cut taxes.

Why?  Another easy one to answer.  The American people are so damn gullible that they believe the tax cuts that are promised will somehow benefit them and make their lives all the much better.  HA HA HA!  Dream on fools!  It only helps those who do not need the help.  Just like the newest stim plan.  The average middle class worker will make an extra $13.oo per pay check–guess that means the vacation to Cancun is out of the question, huh?

The American people are ALWAYS foolish when they hear the word TAX CUT…that somehow they will benefit…they seldom do.  Please Stop Lying To The American People!

Do you remember the American Recovery & Reinvestment Act?  That is the recent stimulus plan that was passed by Congress with little support from the Party of “NO”, the GOP.  Why no support?  They wanted more tax relief.  But the largest part of the plan is $288 billion is for tax relief, and is not that what the Repubs kept screaming about?

They, the GOP, got their way, they got their way on tax relief but yet they still would support the bill.  Reality dictates that they would have supported the Act regardless what was put into it.  It was never about the bill but rather the positioning for the next election in 2010.

So Much Laughable BS!

Gov. Bobby Jindal said Tuesday he had concerns about the economic stimulus package moving through Congress and wasn’t sure if Louisiana would accept all of the money that could be available from the plan.

“We’re going to look at each program, at each dollar, to see what strings are attached before we decide whether it makes sense for Louisiana to use those dollars or not,” Jindal said.

Haley Barbour of Mississippi has made similar statements….these yo-yos are just political hacks trying to look more than they really are.  Push comes to shove these dicks are gonna take the money….I say if there is an outside chance they will not then send their share to Michigan, they need all the help they can get.

All these bozos are trying to do is secure themselves a place in a dying party.  Simple theatrics is all they are about for they have no plans to meet their state fiscal shortfalls.  They will cave and ask for the cash.  If not then these guys are more stupid than I ever considered.