It all started after we let the Government borrow another $800 billion dollars because 'disaster was imminent' and we had to bailout what is apparently the American Aristocracy. Shortly thereafter the Fed Chairman stated that the recession would end this year. A message he repeated and then other media outlets started to fall in line.
I guess I am still a bit curious as to how 3 percent of the U.S. mortgage market caused the 'worst recession since The Great Depression'. It's not even that all those subprime loans were defaulting. I have read about the credit default swaps too and in the end it seems that all that was blown out of proportion too. Certainly there were companies that did some stupid things and brought themselves to the brink of disaster. Unfortunately it was also an election year and there was one party that knew the worse the economic picture was the more they would benefit. So bad economic news was inflated and since economic predictions are mostly self fulfilling next thing we know we really do have a problem because confidence dried up. Since the amount of cash in an economy is really a reflection of confidence that dried up and we enter a dwindling spiral.
So our elected representatives in both the Bush and Obama administrations answered this problem by scaring us into saving what must be some very well connected corporations. They gave those corporations hundreds of billions of our money which in the end appears to have been a thorough waste aside from preserving the fortunes of companies and their principles that really should have simply suffered the consquences of making bad decisions. We were nicely distracted by quibbling loudly about a couple hundred million in bonuses while hundreds of BILLIONS went unaccounted for.
I rant but it is good news that at last what is happening is what is really necessary to save this economy. For all that can be said about President Obama it is undeniable that he and his team are very good at public relations. Saving an economy is about changing a bad and insecure sentiment into one of hope and confidence. With hope and confidence then money flows back into the economy naturally and growth resumes.
Obama and his administration are also correct that to save the economy requires stimulating it with energy (a.k.a money). I think the main question here is whether or not it is the government that should decide where the money gets "flowed" or you and I. Under the current administration they have taken our money by taking out loans that we will have to repay via taxes and will spend it as they see fit. A small centralized group of people deciding how trillions of dollars are to be spent. A great set of circumstances for those that are currently well connected. Hence real change will not really be brought about.
There is also alot of talk now about inflation. Inflation will come about certainly if all the money that is dumped into the economy does not result in goods and services equivalent to or greater than that amount of money. History has shown that this is usually what happens when government does the stimulus spending. This is largely because the government only has as it's goal spending the money. They don't really ensure that the money results in added goods and services of at least equal value to what was spent. A certain portion usually lines the pockets of corrupt individuals, some goes towards projects that were not really needed or wanted and some may go towards things of actual value. There is nothing to say that the government couldn't do this correctly - it just seems that it has never happened that way.
In any case what does one do to participate in the recovery and not get screwed by inflation? This is actually simple - make sure you are producing goods and services that are of value. If there is inflation then your recompense for those goods and services will simply increase along with everything else. If a time comes when we are paying $10 for a dozen eggs it won't matter because people earning $40K a year will now be earning $400K a year. Another part of this is don't sit back apathetically letting the government waste this stimulus money. Those deals are done but Obama has promised transparency and we can hold his and the Congresses feet to the fire. Pay attention, monitor the websites that make public where this money is going. If it is used to add value to our country and its economy we really can come out of this in a much better situation.
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