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Money exists to end the recession -- there is a way out

Obama is in a difficult situation because there are few funds for the government to fix the economy and relieve suffering.

At the same time, if we have the national will, there are hundreds of billions available to the federal government:

$180 billion a year which will come by ending the Iraq and Afghanistan wars

$300 billion a year which tax experts say would come by closing tax loopholes to corporations

$90 billion a year from ending corporate welfare programs

$ 100 billion a year or more by insisting that the termination of Bush’s tax credits for personal income to the wealthy 1% stay terminated

$ 100 billion a year over a ten year period gained by reducing our world policemen role. Experts say that a trillion dollars could be saved by doing this and this will not affect our security and protection from attack.

Total: $770 billion

The total Federal budget is $3.55 Trillion. $770 billion represents a 22% increase of funds.

More funds for programs

These monies could go for job programs and stimulus strategies.

The trick with job programs is to create a job that does not disappear when the government funding disappears; we want jobs that are “post-funding”, long term and permanent.

This means the government must be creative and think in terms of:

· Investing in companies, gaining equity in firms in exchange for hiring people. When the stocks are sold for a gain, then these funds would be used in more businesses.

· Investment banks and venture capitalists – the government can partner with banks and others to create businesses from the ground up finding management, skilled workers and unskilled workers, buildings, equipment, materials and more.

· Apprentice programs can be created which bond one person to another person, forming a very human relationship that old job programs did not. This creates a personal commitment by both parties to follow the process through.

Healthcare

Healthcare is a special issue that requires a solution soon. Prices are controlled at the insurance end by the new program but they are not controlled at the product or industrial end of process. Here is where the primary impetus to raise prices begins. The government will have to break up monopolies, reduce patent periods, and introduce a plan to increase research and development and the formation of new companies through tax credits, grants and more. With more firms and more competition between companies that manufacture drugs, MRI machines, surgical instruments and so on, then we can control healthcare costs.

Foreclosures and Mortgages

Real estate is 10% of the economy and it is in a Depression, beyond a recession. It is the key sector to resuscitate to end the general malaise of the economy. Foreclosures are predicted to continue through 2011 and 2012, this will further drop the prices of housing for everyone, putting more than half of Americans in a situation where their house is worth less than they owe -- meaning that the house, once a nest egg, will become a depreciating asset like car, and the American Dream with a good retirement will be gone.

Obama has $475 billion in various mortgage programs that are not working. If we take this money and add some from the $770 billion above, this is enough to resolve the foreclosure problem by creating a universal loan modification program for homeowners.

However, the main strategy is to get investors to accept that their losses and make a deal with homeowners. The banks sold their mortgages long ago to make mortgage backed securities. They are out of the picture.

Investors will want Fannie Mae to make up for all of their losses. This will bankrupt Fannie Mae. In actuality, the only housing institution that fully guarantees mortgage loans is Ginnie Mae. Fannie Mae is not legally required to compensate banks or investors for all their losses. This would be tantamount to a second bailout and would not be acceptable. The investors will have to accept their situation and make a deal with homeowners, this is the only solution. If they wish to sue the banks for false documentation and information about the quality of the mortgages they bought, that might be a good idea. In the meantime, homeowners have every right to question the ownership of their promissory notes and stall the foreclosure process.

Planned Inflation Strategy

Another thing to consider is that inflation can reduce Treasury bond debt. Today inflation is at 2% a year, the goal of the Federal Reserve is to reach what is considered a healthy level of inflation, 4 to 5% a year. This is done by buying Treasury bonds in the marketplace, this results in an expanded money supply.

When and if it is achieved, this rate would lower national debt more than 40% over ten years. Rising prices and rising profits would increase tax revenue, and the debt will reduce. So a planned inflation strategy would be very helpful.

Many of the monetary elements exist to end the current crisis. The primary issues are about analysis and strategy and of course, national will.

Three things to fix

Three big problems need to be resolved

1) Foreclosures, as said previously

2) Maintaining a good credit rating with the world community is essential. Once our credit rating is downgraded, the interest the government will have to pay on loans will surge. Then higher taxes must come and the economy will lose energy for recovery.

3) The Financial reform law passed in July does not address some fundamental problems. Today banking is a combination of traditional loan making and stock market investing. Glass Steagall passed in 1932 was designed to separate these two financial realms, for it was deemed then that merger of the two caused the ’29 crash. Glass Steagall was repealed in 1999, and quite shortly after we had our housing crash. The Volcker rules do not separate the two types of industries and behaviors, though they try to restrict activity. Banks should be split into two entities or we will have similar problems down the road. In addition, the US traditionally has a credit economy which in the last decade went to absurd levels. As a result, we have too many banks, some banks have to be shut down or reduced in size.

These are our three of our biggest economic problems.

These problems are fixable, there is a way out for US citizens. We are going to have to wage a decisive battle against big interests and think in large terms, as leaders did during the Depression. The Depression of ’29 evolved, the economy actually hit bottom three years later in the winter of ’32.

The worst may be ahead of us if we don’t act.

Cage Innoye

Please see article, Triage Program for the US Economy

https://sites.google.com/site/axxiadnewsandideas/p-37

See booklet, For a New Economics

https://sites.google.com/site/axxiadnewsandideas/ebook-download-p-11