Tuesday, November 25, 2008

Government announces new loan programs

How is this going to help fix the problem that got the economy here in the first place?
"The government, while looking to reduce fear in the credit markets, is eager to see lenders like credit card companies resume more normal levels of lending to help stimulate the economy. Since September, when credit markets first froze, financial institutions have been hesitant to hand over money for fear they won't be repaid."
This sounds like such a bandaid fix to the real problem - consumers don't have money to spend. By extending a helping hand to the companies that lend money to consumers, the government isn't doing anything to help the consumer other than give the Creditors even more control over consumers. The average American is weighed down by debt - mortgage debt, credit card debt, car payment debt. The American dream comes at a huge price, and I believe one of the reasons the economy has faltered is that both the government and private banks encourage consumers to spend way beyond their means.

A better place to invest at least a part of the 800 billion is in upgrading the infrastructure - this will create jobs, which will reduce the jobless numbers. More people will have a sustainable source of income, a paycheck that they can draw from while shopping at the grocery store or the mall. This is a virtuous cycle in which everyone involved prospers, including the economy. I read somewhere that Obama plans to make large investments in Job creation via infrastructure project; the rate at which the government is spending BILLIONS on bailing out the financial sector, I wonder whether there will be any money left for anything else by the time he is inaugurated.

Regardless of government initiatives, I think it is time that the American populace take back control of their balance sheet from the Credit Card companies by hunkering down and spending on only things they can afford. The "consumer" economy isn't in recession right now - it is correcting itself from the super inflated levels of the last 5 years. People are no longer buying things they *think* they will need a few months from now; people aren't intoxicated by bargain prices on useless items any more. They have figured out what they need and are buying just those things, albeit with an occasional splurge on something they covet. That's how every other consumer is, and it is humbling to watch the American consumer follow suit.

1 comment:

  1. How is it going bhenchod? I saw the bhenchod website with the DUBYA...I fell of my chair laughing!