Why The Stimulus Will Succeed Or Why it Will Fail...

Discussion in 'Economics' started by TopTrader8, Feb 15, 2009.

  1. The Stimulus will succeed because the government will be creating jobs that would put spending money in the hands of those who take those jobs. This in turn will enable these workers to spend what they've earned on goods and services also known as boosting demand in the economy. This boost in demand for goods and services will in turn cause private sector companies to create more jobs to meet the increase in demand.
    This is basic demand side economics. So why are there so many people screaming that this plan is doomed from the start before the infrastructure jobs have even been created? Give me a break!

    On the other hand, the stimulus will not work if illegal workers are allowed to take these jobs. It is widely known that these workers send much of their money that they make back to Mexico. Doing this is removing demand for goods and services from our economy. We can't afford to spend billions of dollars on infrastructure projects just to have those dollars flow to Mexico and weaken the attempt to stimulate demand here. This will be a major demand leak in the stimulus plan. So if Obama wants the stimulus to actually stimulate our economy he better find a way to make sure that all of those infrastructure jobs are given to Americans only.
  2. achilles28


    Banks and credit will be the stop limiting factor, to all this.

    If the increased depository activity from the bailout does not find its way into greater and looser lending, then it will probably be all for not.

    IOW, banks will probably hoard consumer deposits, just like they did with Government money. There is no reason why they won't. Its their P&L - projected and historical - that dictates loan portfolios'. Not ownership of money lent to them.

    We'll see a short-lived rebound in economic activity and money velocity, and perhaps Corporate profits. But once that load is shot, taxes and hoarding will suck whats left and we'll be back at square one.

    1 Trillion isn't enough to jump-start the US economy. Maybe 5 Trillion.

    Also bear in mind that Americas economy is structured around flipping, speculating and financial service. So money velocity or circulation effects will be quite limited before bailout cash is exported to China for cheap shit sold at Walmart.

    Domestic recycling of cash is low when there's no production-base to "trickle" through.
  3. Instead of congress whining like they did when the Tarp funds were used to buy preferred stock in banks that still refused to lend, why couldn't they just demand that an ultimatum be given to the banks that the government would began to liquidate their preferred ownership if the banks didn't get off their butts and start giving credit to everyone again? Seems to me that this is still an option. Am I wrong?
  4. It's not money the US economy needs. What it needs, money cannot buy in an efficient manner. It needs TIME.
    Time to work off the overconsumption of the last few years.
    Time for people to get used to "less".
    Time for people to get used to a smaller vehicle.
    Time for people to get used to a smaller house.
    Time for people to realize US is no longer "#1" as they were told.
    Time for people to produce something they can sell to the world.
    Time for people to get used to buying less imported junk.
    Time for people to STOP wasting their $$$ on useless shit.
    Time for people to once again start saving some money.
    Time for people to stop wasting so much of their lives observing the equity of their house go up & down and suck every penny in HELOCs.
    Etc., Etc., Etc.

    You can't rush this "time" with $billions/$trillions.

    In fact, all you're doing is making the problem MUCH worse!

    As for when this "crisis" will be over, here's an easy way...

    When you go to Barnes & Noble and there are no "featured" real estate books, no "featured" stock market books, and instead there's some "featured" book titled something like "Prepare for the coming Armageddon". That's probably the time to buy like crazy!
    That's the BEST indicator of all.
  5. I disagree risktaker. Without money you cannot create demand. If demand is waning then more jobs will be lost. More money is exactly what the economy needs. More money in the hands of those who will spend it more on goods and services rather than paying down their debts with it, that is.

    Though I do agree that there is a limit to how much one should have to pay for goods and services via inflationary pressures before the bubble burst big time as it seems to be doing now.
  6. achilles28


    Its an option. But has no-teeth.

    Banks are no longer using the market to accumulate capital. Banks are using Government. So if preferred bank shares go to 1 cent and the Government still hands them Trillions, they'll remain solvent.

    Risktaker is right. The US economy has taken on a tremendous amount of debt, that must be paid off with relatively paltry incomes - corporate and consumer.

    Until then, nothing will change. Plus, Banks need to go under. Let all the weak ones go under.

    Withdrawing Government funds would accelerate the whole process and get us back to 0 point, much quicker.
  7. You want MORE money???

    Look what all the money got you in the last several years?

    Remember, it's not YOUR money. It's DEBT! DEBT!

    Sometimes debt can be used for productive causes.

    But this money will just end up in China, Europe, Japan!!!!

    The US is like a crack addict with money now!!!

  8. dtan1e


    i have personally seen serious entities try to move a single stock with serious amount of money but not get anywhere when its a weak stock, same case, i'll be truly surprised if the stimulus package work, an economy takes decades to get to where it is, u can't jump-start it by throwing trillions at it, its not a car
  9. dinoman


    It will fail because you can't cure debt with more debt!


    That goes for both parties!

  10. No, it's not debt to the worker receiving the funds. It's spendable cash. It is debt to the government which can sustain the load (or carry us until we get back on our feet). All the fed has to do is keep printing money that can get into the hands of the consumers.

    And after the economy starts growing again then we will have to look foward to the horrors of increased taxation for years to come. But at least we shall have avoided a depression where nobody is working and everybody is starving.

    If you will note in my previous post, I indicated that the government desires to stimulate our economy with increased demand in goods and services. Demand that will begin to create more jobs here -- not in China and Japan. Those guys will have to be on their own for a while -- we need to start buying American for now.
    #10     Feb 16, 2009