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How Do We Turn The Economy Around?

by | Mar 2, 2009 | Hawaii Real Estate | 0 comments

What’s the formula for jump-starting the nation’s economy? That’s the question of the year and one that dominated the news in this past month of February. Rightly so. Everyone seems to have an opinion regarding the right answer, so let’s recap some of the ideas we’ve all been debating around the water cooler.

#1 An $800 billion stimulus plan to create jobs and put people back to work.
Problem: Critics think it will only create temporary work, not long term jobs, has too much pork and they fear this infusion will take too long to stimulate any immediate growth in the economy.

#2 A plan to create a bad bank to soak up all the toxic assets of our national banks.
Problem: Critics say no one knows how to value bank assets. Pay too little for them and banks are still in trouble; pay too much and tax payers will never see their money back on this asset investment.

#3 Lower interest rates and stimulate housing with tax credits for home buyers.
Problem: Critics say if the interest rates go any lower we’ll have too much inflation and that tax credits do not reach a large enough group of people to make an impact just first time home buyers.

#4 Don’t do anything. Let capitalism work to weed out the chaff and let the economy right itself.
Problem: Critics say too many innocent people will be hurt and the economy will collapse on a grander scale than what we saw in the Great Depression.

Now, I’m not going to pretend I know more than the next fella, but there are two things I’ve learned from this mess. First, housing started this problem and housing is likely the answer to get us out of it. Secondly, it is blatantly apparent that the average American is absolutely addicted to debt. Banks have no money coming in their doors because Americans can’t pay their mortgages, their car loans, their student loans or their credit cards. Until we learn to live within our means, I fear we’ll be down this road again and again, no matter what plan we implement.

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