A Five-Step Plan to Prevent Great Depression II 14 comments
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Trillions are being spent by the US government on bail out after bail out, yet the economy continues to fade away. We’re quickly seeing the excitement from an Obama presidency dissipate, as leading Democrats (from his own party no less) openly question key components of Obama’s $2 trillion economic stimulus program.
As I’ve been writing, the key to turning around the economy is reaching a true floor in the housing market and re-engaging the American consumer, whose purchasing power is responsible for over 70% of our GDP. In turn, these changes will reverse rapidly deteriorating corporate profits, which look to drop over 30% from 2008 levels.
The following is my plan to reverse this economic deterioration on a dime. Once implemented, this plan will turn the economy around in less than one year. I’m talking about a reversal from what economists are predicting will be a negative 5% GDP to a positive GDP in under 12 months. Sound too good to be true?
It’s not…read on...
5 Step Plan to Prevent Great Depression II
Step One: Eliminate all Federal taxes for 1 year (both personal and business)
This first step is far and away the most important, and will result in an immediate explosion of true economic growth. Yes, this will result in approximately $2 trillion less in government tax receipts, but isn’t this about the same size as Obama’s proposed stimulus package, which would also result in tax liabilities that our children and grandchildren would be on the hook for, and for decades to come?
With my program, 100% of the $2 trillion stimulus would work its way into the economy… immediately. Remember, with government sponsored stimulus programs, 30 cents of every dollar is lost in administrative costs, fraud, bureaucratic red tape, etc. There’s no better way to get the consumer spending, and business hiring, than direct and immediate tax cuts. Remember, we lost our manufacturing economy long ago, and it was replaced by a consumer based economy. Therefore, in order to turn the economy around we must see the return of the American consumer. The velocity of money, which has been essentially non existent, would return overnight and the deflationary fears of the FED and monetary economists would very quickly become a thing of the past.
In addition, the Federal government should mandate that all 50 states do the same with sales taxes in their individual states. The increased spending by consumers would quickly shore up housing and retail spending, restoring the American consumers place in our troubled economy. Bankrupt states such as California and New York would soon be talking about the economic miracle that they are witnessing right before their eyes, and the tent cities that are springing up throughout the country would vanish.
The $2 trillion in Federal tax savings, along with the tax savings in all 50 states, would go directly to our bank accounts and the result would be a near overnight return to prosperity across the country. When foreign governments see the incredible turnaround happening here they would launch similar initiatives, and any fears of Great Depression 2 would be a distant memory.
Step Two: Cut the Federal Government's Budget by 25%
Make these changes effective immediately, and across the board. This mandate will send a strong message that Government is indeed serious about reducing our exploding national debt. We’ve been in this recession for well over a year and have yet to see ANY reduction in the size of government. Including entitlements, total debt is now over $70 trillion and unless we address this problem immediately taxes will have to rise to 70% on all Americans within 10-15 years. Let's get started now. The message that the Federal government will send with these budget cuts will trickle down to states and to individual families.
Step Three: Place the US dollar back on the Gold Standard
Nixon removed what was left of the gold standard in 1971, and the result has been massive inflation and debasing of our currency. A country cannot thrive with a weak currency…end of story. In my plan we would begin a 20 year incremental policy to back each dollar by 20% in gold (1% per year). This move would force the government to turn off the printing presses for the US dollar. Simply put, we would not be able to print what we do not have in gold reserves. Thus, the government would be forced to be balance their budget, just as each business and family must. No Weimar Germany here!
Step Four: Radical Overhaul of Lobbying and Special Interest Groups
Insider dealings and conflicts of interest will ultimately destroy the US, just as they did the Roman Empire… and as they are currently doing with Wall Street.
Our system is imploding from within, and we must restore honesty and transparency.
Step Five: Eliminate the Vast Majority of Financial Derivatives
Eliminate the ability to create or to use derivatives instruments in the financial industry… those that do not directly add to the well being and health of a particular industry or commodity. Derivatives make a lot of sense for a farmer that is hedging against a bad crop season, but they make no sense when used by financial institutions that are using them to increase their leverage and their investment returns by 2% per year, while placing the entire financial system as we know it at risk.
This 5 Step Plan will restore economic security and reverse the risk of another Depression that WILL happen unless we enact systemic change. Remember, if our leaders in Washington really believed that Obama’s $1 trillion jobs program would create 4 million new jobs, then we could simply throw $2 trillion into the program to create 8 million new jobs. Or, why not $3 trillion to create 12 million new jobs? Folks, these government sponsored job programs simply do not work as advertised, and are used simply to increase the size and power of Washington and its power brokers.
Bigger government is not the answer...Government created jobs are not the answer…Trillions in taxpayer funded bailouts are not the answer. The business model of the entire financial system is broken. And the pain is only going to get worse.
The answer lies within each and every one of us. Entrepreneurs operating in a free enterprise system are what made this country great and this economic program will empower them to make it great once again.
Stock position: None.
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This article has 14 comments:
2) While gov't does need to reduce spending, a 25% spending cut would have the reverse effect on the economy. It would add more depression to the sinking ship. And where exactly would you make a cut of that magnitude? Cancel SSI or Medicare?
3) We cannot back our currency with gold because we are so far in debt. And any attempt to move that direction will further depress the economy as it takes spending power out of flow.
4&5) These are great steps to take, but it won't bring us out of recession/depression.
1, which parts of the US gov should be cut by 25 percent first? The defense department, with its international commitments stretching our military to the breaking point? Social Security - let's tell your mother that we're cutting her check by a quarter - it shouldn't matter to her landlord, after all; he's just gotten a free pass for a year against all income taxes.
That vast majority of financial derivatives is what makes it possible for corporations to borrow and fix their costs while a banking system with variable costs can lend with some assurance that the borrower's interest payments will cover its varying costs of capital. Junking that one would really inspire confidence and add to business activity.
The only funds a government spends are funds it takes from you now with taxes or inflation, or alternatively passes the obligation on to our successors. Given the government spending track record, and the influence of vested interests on spending plans, do you really think any government can spend your resources better than yourself?
The article seems on target to me
2) For health care government should adopt policy of free to all medical services and removing the health insurance as middle men. Government can take some money from each person, anyway we pay that to health insurance companies) and on medicare should be removed as it will not be needed. Government can control health care cost very significantly by this.
3) Focus on Technolgoy R&D and Economics research to boost US leadership in Technology and Business.
On Jan 15 10:53 AM MarvinMBA wrote:
> Its an impossible dream....we would all go down the tubes faster
> than you imagine. Were in a major DEPRESSION right now and there
> is no easy way out of this problem anytime soon. The whole system
> is going down the tubes....get your victory garden going is my sage
> advice..MarvinMBA
What are the economic foundations of your views?
Did your economics training come mostly from personal reading or from formal training?
Which economists are the major influences in your thinking?
Thanks, Jim.
You gotta love the Brits and their can-do attitude!
Austerity measures are too much like work, and Americans are pushing hard the other way. America just elected an executive and legislative government that promised to copy all of Europe's programs but with no measures to make them succeed. (The government will take care of you. Free food and toys for all!)
The UK could pull off the measures in this piece. But the USA is a less cohesively patriotic nation, and the crap floats to the top. Since turds are controlling the economy, it will stink for years to come.
(If he could catch a politician, Marvin would have plenty to fertilize his garden with.)
On Jan 15 12:50 PM 31October wrote:
> Re: Britishsteel "not impossible marvin painful yes but not impossible
> 50% of this decline was caused byt government trying to save these
> crooks"
>
> You gotta love the Brits and their can-do attitude!
>
> Austerity measures are too much like work, and Americans are pushing
> hard the other way. America just elected an executive and legislative
> government that promised to copy all of Europe's programs but with
> no measures to make them succeed. (The government will take care
> of you. Free food and toys for all!)
>
> The UK could pull off the measures in this piece. But the USA is
> a less cohesively patriotic nation, and the crap floats to the top.
> Since turds are controlling the economy, it will stink for years
> to come.
>
> (If he could catch a politician, Marvin would have plenty to fertilize
> his garden with.)
Your article has some interesting thoughts to it.
One thing that is for sure right on the dot, is the fact that what government is doing right now (stimulus and bailout packages) are
a) not working
b) inefficient
c) increasing national debt
c) not tackling the underlying source of problems
The essence of this global crisis however is based on a house of cards philosophy:
- Companies inflating profits and revenues
- Financial investors speculating
- Greedy CEOs harvesting collosal bonuses
- Government grazing huge amounts of debt
- Companies earning billions while paying miserable salaries
This house of cards had to come down sooner or later...
In effect there is a completely rotten and ineffective system in place. So I agree with you what's being done is complete **** and something else needs to be done.
As to your specific 5 point plan, I believe it lacks many practical aspects as well as realistic foundations (also mentioned by others on here).
And one of the main fallacies here is to look at this problem solely as a US problem. Unfortunately, we live in the age of globalization and markets, economies, politics, etc. is globally connected - thus any solution needs to be on a global level.