ECONOMY: What has worked in the past?

We will be talking about the economy a lot in the next few months because it IS the main subject everybody is and will be talking about. Since no one knows what will work to get us out of this mess, I will be exploring many different options and opinions.

Recently, I have been hearing many economists throw out examples of options that have been tried by other countries as a way to gauge what will work for Obama and what probably will not.

One good example is JAPAN. They went through a real estate bubble that left many banks and people holding worthless securities, mortgages and real estate. The Japanese government did not demand that the banks, etc. write off these worthless financial instruments. This decision created ZOMBIE BANKS and companies; they were not dead but they were not alive either and the Japanese economy has remained stagnant to this day.

No amount of stimulation by the government has worked. People were handed cash to spend and they basically put the money in their pockets.

Some economists are saying that no amount of government stimulation will work as referenced to the Japanese efforts as well as our own efforts during the Great Depression. They say that leaving the economy to heal itself will result in a stronger, more durable economic model.

But if we are to leave the economy alone we should also take back our billions that we dispersed to all those banks. They would fail and restructure but they would not remain worthless ZOMBIE banks that live but cannot lend.

Now our government is talking about creating a “bad” bank that would buy up all those worthless securities from banks that hold them using taxpayer money. I have argued from the beginning that banks must fail based on their unwise decisions; they cannot remain zombies.

Setting up taxpayer “bad” banks would do the same, bringing banks back to lending health, but without having them declare bankruptcy.

The difference between the two options is that in one the banks pay for their sins and in the other, we pay for their sins by being stuck with TRILLIONS of worthless financial paper.

I think everyone now agrees that giving the banks $350 Billion in TARP funds was a colossal failure. Saving Meryl Lynch was dumb and letting Lehmann Brothers sink the way they did was even dumber; our government is clueless as to what needs to be done, they are just reacting without any pre-thought to their actions or the long term effects of those actions.

I don’t believe President Obama’s plan will get us out of our New Depression but it will create some jobs and just like in the Great Depression, the president will appear to be doing something instead of just waiting for the economy to correct itself as some economists suggest.

We all know that a DEMAND must be created for the economy to move. How can that be achieved…