Maybe we should have listened to Chairman Eccles (Fed Chair, post Great Depression) when he told us that too much debt caused the Depression of the 1920's. Or maybe we, the people, did listen to him, but were blinded by the sexy and promising "derivative" contracts. These contracts are more complicated and full of lies than a reality show, but that's another discussion. No matter what the cause, the users abused the system, and IT happened.
My favorite part of this is how the Houses and Chief are playing Monopoly: Electronic Banking Edition with each other, where they think they can "wheel and deal [their] way to a fortune even faster using debit cards instead of cash! All it takes is a card swipe for [endless] money to change hands." (hasbro.com) And so they just keep pushing money into America's torn pocket, where it just falls back out and NOTHING happens, as we can clearly see. Thank [insert name of to whom you pray, or not] for Chairman Bernanke's tactical use of Fed artillery and special forces teams, steadily reviving the market, as well as managing the mistaken bailouts. If it wasn't for him, we would be in even more of hole. We need to sew the pocket before more money is dumped in.
First of all, why doesn't throwing money around do anything? It's a lengthy process that money goes through, but I'll try to make it as simple as possible.
For simplicity, let's say the government put $100 into the economy. To get the money, the government issues debt, so immediately we increase the U.S.'s deficit. Next, John Smith, who was laid off from the crisis, gets his share and spends it on bills. Now, the electric, gas, and water companies are paid this month, keeping them at the same level of workers and revenue as before. Their employees are paid, keeping them in work, who then spend their payroll on their bills, etc. And the cycle continues on and on until it gets back to the government in the form of taxes. So, what just happened? The government sent $100 into the economy, that money went round and round, and came back at the same level. But the government now only has the $100, but nothing extra to pay the interest on the debt they issued to get the $100. In conclusion, with the costs of time and labor spent to devise this so-called "master plan," the economy has lost money.
What should actually be done?
INVEST! in the people, by investing in technology. And by "technology" I mean new inventions, both tangible and intangible. That is the only way NEW jobs can be created. All of this time that derivatives, futures, collateralized debt, etc., thousands of jobs were created based on all of these Funny earnings. Now that that bubble has popped, our leaders think jobs are just going to come back, and giving money to the people for them to spend will create jobs. Well, it does for a limited time, and NO revenue earned from the investment. If Obama and his crew ran an investment house, it would be called Lehman Brothers.
Anyway, we need to invest in things like green technology, a newer technology with long-term growth (not to mention its outstanding monetary and environmental benefits), implementation and creation of new information technology, a newer technology with long-term growth (like for HEALTHCARE REFORM), and allotting money for Public Works (long-term investments that can bring return to the government). These are just a few ideas, but they are solid: New Technology is our ticket out of the hole we are in, permanently.
And so, here we are, watching the government burn the Dollar down to the ground. The solutions are at our fingertips and we obviously have the budget for it. Maybe someone needs to tell Capitol Hill that Freakanomics is not an "Economics for Dummies" book!?!?
What will be their next move; what will be your's during election season?
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