ECONOMIC STIMULUS

Let’s talk about economic stimulus. Is there really such a thing and why would it be good? Economy is the way we support ourselves so we can live an obedient, disciplined life. The basics are food, clothing and shelter. Every thing after that is not a necessity.

What is the real current economic situation in the country? …in the world? I would suggest that we are about where we should be. A year ago we may have been living in a fantasy situation. I suggest that since 1935 in this country the real economic condition has been growing at about 2.5%/yr, (about the same as the population) Since 1985 we have been in a falsely created situation. We have been living “higher” than affordable. We have been living on “borrowed” money. The FED and others have been maintaining that by manipulating interest rates and other factors to “stimulate” unrealistic borrowing. The condition is sustained by borrowing more. Now we are at the point of the, so called “Credit Crunch”. We don’t have a credit crunch. We have a debt problem. We are borrowed up to our eyeballs and higher and there is no place to turn. Te bubble has burst. The house of cards is falling down. How far will it fall? …a little below the real sustainable commerce level. We are almost there. I think a Dow of 4000 will bracket the situation. The DJIA is made up of 30 good industrial companies. (well, mostly good) Their current earnings levels have stabilized the index at the 8500 mark. But, earnings in the next quarter and the next year will be 20 to 30 % lower. So, I expect the index to decline further. And, people have to get their finances back in order. They must reduce their debt levels. They have to get back into a positive savings mode. They needs three to six months of living in their checking accounts. They need four to five years of living in their savings accounts. The price of homes has to get back to realistic. Used home prices should be at or 30% below the building costs. What are the prices in your community?

To reach this stable situation reveals discomfort for some and disaster for others. We need to make provisions for those who are out of work and out of their home. Eighty or eight five percent of the people are and will be okay. But, fifteen to twenty percent are going to need some help. Some of these need help indefinitely. Others will eventually find employment and get back on their financial feet. It will take two or three years to sort this out. Obama is talking about a “Stimulus Package” aimed at 2,5 million people. He wants to spend whatever it takes and create jobs for this number. The current estimate is $1 trillion. I think that is two few jobs and too much money. And, it is an ineffective way to inject growth into our economy. We don’t need “made up” jobs. We need “real” productive jobs. We need purpose. Most of the efforts proposed and tried so far are aimed at getting us back to an unrealistic condition. We need to recognizes the folly of our previous ways and get on a new path with purpose and righteousness. We should talk about that another time. Right now let’s talk about stimulus.
How many people are in trouble? The size of our workforce is elusive. But, let’s say we have 100 million who can and should be working. So, if 85% are okay, then 15 million are not okay. That’s a bit more than the 2.5 million jobs Obama wants to create.

How much money? Let’s say we have to help all of them for a year and half of them for two years. Then there is the 5% that always need help and we already have “adequate” provisions for them. So, that means 10 million for one year and 5 million for one more year. At an aid level of $20,000/yr each that is about $200 billion the first year. … about half that amount for the second year or $300 billon for the two years. The Obama estimate is $1 trillion for 2,5 million jobs. Once again I say, too few people helped too much money spent.