Ahh yes, more criticisms concerning this proposed stimulus package by Obama & the "Democratic" House.
They say history is important so we can learn from our mistakes. It seems, though, that these politicians know nothing about our history. The New Deal was established to stimulate a sinking economy. Did it help? Not at all. If FDR and his administration would have done absolutely nothing, America would have been better off. Welfare, social security, official unemployment benefits, all were applied under FDR's New Deal. Also, infrastructure plans to provide employment to the unskilled, out-of-work laborers were instituted. All of this resulting in higher taxes and increased government spending which, as we see now, did nothing to pull us out of the depression.
It is important to understand why these policies didn't work then, and why they wouldn't work now. The New Deal was all about government control and central planning, which seems too familiar concerning our present situation. We know our economy is in bad shape, but is it really a bad thing. Yes, it is, but no, it isn't. Obviously, the overall wealth of our nation has decreased significantly affecting many industries with drops in purchasing, employment, and output. However, I look and think that, if nothing at all, we should learn from what put us in this situation. Instead of placing the blame on greedy corporations, we as Americans should be evaluating ourselves. "The housing market has collapsed and it's all 'Big Banks'' fault." Really? Excuse me Mr./Mrs. American consumer, didn't you realize that you wouldn't be able to afford a house like that in normal economic conditions? Now Dems are pushing legislation that would allow bankruptcy judges to lower/set aside terms of mortgages for people filing Ch. 13 bankruptcy. Where is the personal responsibility? Banks are in terrible condition for making bad loans, and if this legislation passes they would keep losing money. How many more banks will fail if this happens? Politicians are coming out saying that the government could possibly subsidize the losses incurred by the banks through the legislation. So what, I have to pay for the mistakes of people who got in over their heads because they spent money they didn't have?
Hey! Fannie and Freddie are $5 trillion in debt! The government can't fix this by borrowing foreign funds, or taxpayer money. We need private investment to start investing, but unfortunately, the government keeps buying up these mortgage-backed securities which is crowding-out private investments. The more they try to help, the worse off the American consumer gets.
One solution that has been proposed by a few economists is to set up a "Bad Bank" and put all the bad loans in this bank, then decide how to sell off these loans. They would use a futures market on the Chicago Exchange and let private investors bid on them to see what they're worth. Fire sales won't work because the banks who provided these loans would keep losing money; and paying market value wouldn't help either because now you're incurring the risk of holding these bad loans, and in this situation the risk just isn't worth the reward.
Clearly, the economy is in bad shape. The Fed continues to purchase long term Treasury bonds to help stimulate the economy. The effects of which are already starting to show: the Treasury Yield is around 2.77% with economists estimating that this figure will continue to fall. The Treasury Yield is a benchmark for the 30 year Treasury Bills, which is an indicator of mortgage rates. If the Yield keeps falling, it could mean a stimulation in the housing markets.
If we're lucky, the government will stay out of our way and let the markets adjust. However, it doesn't look like that's going to happen, so prepare for a bumpy few years.
Up next: Can America learn from Ireland and Japan?