1. Today’s financial system is far too complex and interwoven for traditional public finance tools to work predictably. For example, as far back as before the 1930′s it was fairly clear that lowering interest rates had upside potential. But now, we’ve got seniors without guaranteed pensions living off of savings often invested in bonds that may or may not produce the income that they need when monetary policy changes interest rates.
2. These traditional tools are Rube Goldberg machines for solving the issue in my opinion. There is unemployment because businesses aren’t hiring, because demand isn’t there, because people don’t have money to spend. And even if people had money to spend, nine times out of ten it would go towards paying down household debt.
Our government has very smart people at the top. But on this issue of improving the US economy, they’re thinking way too hard.
Rather than apply quantitative easing and giving money to banks towards encouraging lending towards entrepreneurs creating jobs towards putting money into people’s pockets which will produce spending–just cut out all of these middle men, put that same money in an envelope and mail one to every US household.
In the age where millions of people donated $25 to produce millions each month for our current president’s campaign, why not have the same faith in millions of people–when directly given the tools to feel secure to spend–to produce a “Trickle Up” economic recovery?
$1.7 trillion dollars were given to the banks in 2008 for the last attempt at QE. With the 2009 US population estimate at 310M, a Main Street QE would equal a check of almost $5500 to each person in the US.
If we narrowed the recipients to individuals over the age of 18, using 2009 census number the check would increase to just over $7200 per person.
And if we went by household, approximately 105M households by the 2009 census ups the check to $16K per household.
In order to increase the likelihood of having a return on their investment, the Federal Reserve could provide the following three choices to individuals on how to spend the money–and more than one could be chosen:
Choice 1: Enroll and pay for a local corporate or public sector provided educational program to learn competitive skills–skills that would give people the tools to build things such as software, electronics, and other sellable products.
Choice 2: Use the money to pay down household debt, and deposit a percentage in a local bank (which would provide local banks with deposits towards providing loans to the community).
Choice 3: Save a percentage, and spend a percentage in local businesses.
It’s definitely not easy to solve the problem of spurring the US economy. But if QE2 is implemented and doesn’t work, just don’t try to fool us a third time.