Monday, December 22, 2008

Hope for the Economy in 2009? (I'm Still Not Convinced)

It is great to have hope that our economy will rebound. I hope that things improve and our society moves into a new "golden age." I believe that we will eventually get to that point, but how many of us will survive the journey? Certain economists believe that things will improve in 2009.
But a panel of economists surveyed by says that — maybe, if all goes well — we could be closer to the end of this recession than the beginning. Now 12 months into a downturn that appears to be deepening, there are early signs that the elements may be coming into place for a convincing recovery. That “best case” forecast calls for the worst of the downturn easing by the middle of next year, with slow but steady growth in the second half of 2009. “We do have a number of forces that could come together to produce what could be a fairly strong recovery,” said Nariman Behravesh, chief economist at Global Insight.

Let's analyze some of things it said will trigger the recovery.
One of the major forces pushing the economy back on a growth track is a historic series of moves by the Federal Reserve to pump trillions of dollars into the financial system. Another is the huge package of tax cuts and government spending — some believe it could approach $1 trillion — that the incoming Obama administration could have in place by early next year.

How do you pump trillions of dollars into a financial system without some type of equivalent production (i.e., incomes earned for goods produced and services provided) for the amount pumped into the financial system? If you do not have some type equivalent production, then the pumped money is a fiction. It might as well be Monopoly money.

If I owe Citibank $200 and I only have $75, the only way I can make up the difference is by either (1) borrowing $125; (2) selling thing(s) I own of value for $125; or (3) working to earn an additional $125 in wages. I left one option out, because I am a law-abiding citizen. Nevertheless, if I wasn't a law-abiding citizen and if I had a fabulous printing press, I could print up the extra $125 I needed for Citibank. However, I would likely be visited by the Secret Service and sent for an extended stay to a stellar federal cross-bar motel. If I can't print up extra money for my bills, then why is the Federal Reserve allowed to print up money out of thin air and "pump it" into the economy?
Another is the huge package of tax cuts and government spending — some believe it could approach $1 trillion — that the incoming Obama administration could have in place by early next year.

Can someone in the President-elect's administration or supporter thereof please explain to me in specific terms how the administration plans to pay off a current $20+ trillion dollar deficit when it proposes both tax cuts and additional government spending? And saying that we will simply borrow the money from some foreign entity is not an acceptable answer.

Where is all this money coming from? Where? Where? It is being created out of thin air like someone has a genie lamp. Actions like that devalues the money already in the system. Putting an extra few trillion dollars will do nothing, but dilute the current value of the dollar in our pockets. Nevertheless, if you are printing up money from nothing, can you give me a bailout of my student loans? Sallie Mae will provide the pay-off amount.

Unfortunately, I do not see us coming out of this recession/depression for a very long time unless some unknown technology is created and released to the commercial sector where it then fuels the advent of an entirely new industry that sparks a new type of industrial revolution.

Someone call Contessa Brewer! She'll get to the bottom of all of this!

Source: MSNBC

No comments: