Thursday, February 12, 2009

Debt Crisis vs Credit Crisis

Blogger James Boyce
has a few questions that need to be answered before an economic stimulus package is passed.
  • What are the underlying long term economic trends that set the stage for the current crisis?
  • What were the short term economic events that triggered the crisis?
  • What are the short term programs that can cushion the impact of the crisis?
  • What are the longer term programs and plans that can prevent the crisis from happening again?
Because, like the wise old philosopher said -- first you have to understand what the problem truly is, not just the symptoms the problem is exhibiting.

I agree with Boyce, it is not a credit crisis. So, no matter how much money is simply thrown at the banks, it will not solve the problem. We have already seen that -- the banks just give bigger bonuses to the creeps that helped cause this thing in the first place.

Boyce feels this is a debt crisis. In that, I believe, he has nailed it.
  • Too much house debt -- using your home to finance your "lifestyle" is an idiot move.
  • Too much credit card debt -- if you can't pay it off in 3 months, don't charge it (you probably have too much "stuff" already); better yet, pay it off every month.
  • Too much car loan debt -- you really don't need a new car every other year.
See my post from 17 January 2009. I have already sounded off about excess before. So, I will try not to get off on a rant here again.

What needs to be done? This would really jump start the economy, but I have decided the amount probably should be more, maybe $3000-4000 on each debit card.

Then, unemployment benefits should be vastly expanded and it should go back and pick up the people who have just given up looking for work. Even Wal-Mart announced lay-offs this week. There are simply too few jobs out there. And the jobs there are do not exist where there are people looking for work.

Food stamps have got to expand benefits. Children are going hungry. And that is unacceptable.

After that, some of those magnificent construction & improvement projects should be up and running.

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