Business-Insider

What are you doing with your $600?

The Economic Stimulus Package is going to offer most Americans a check for $600, in an effort to get the economy ‘jump-started’. If things are really that bad, how did it stay hidden for so long?

Reality. In reality it really was only when Equities started to slide last November that most people became really aware that all was not rosy in the Markets. Most had accepted that the Housing market was pulling back hard in some regions, but had been told by the Fed that Wage Inflation and GDP was still their main concern. Within 2 months we saw savage Rate cuts, after seeing nothing for 18 months.

What went wrong, what changed so quickly that the Government is doling out money to all and sundry? More importantly, where is the money coming from?

If you take your $600, as the Government want you to, and invest in a Plasma Screen, a Refrigerator, a Car deposit, a Lap-top, or any other consumer product, you will be ‘Jump-Starting’ the economy. But, if you do not buy American made goods all that you are doing is taking the $600 and giving it to somebody Exporting their goods to the US, therefore increasing the Trade Balance, and sending the cash overseas. Maybe the Government should have issued a Credit Note to purchase American made goods only. Unless you ‘Buy American’, a chunk of your $600 rebate is not going to do the job that it was designed to do.

If you take your $600 and pay off a Credit Card, a Mortgage Payment, a Loan that is in arrears, or pay off Debt, all you are doing is paying a tiny slice towards the horrendous losses that are currently sitting on most Lender’s books. Paying off debt will not help the economy get ‘Jump Started’. Lower Interest Rates having time to get absorbed over the next 6-8 months will do that.

So, where does the $1.5 Billion (That is a lot of Zeros) come from? This is not an economy that is flush with cash, far from it actually. This is an economy that runs a $9 Trillion (That is a lot of Zeros) deficit.
Ahh, what matters? With all of those Zeros what does 1.5 Billion more matter? Get the Printing Press running, throw some cotton and paper together, run some green ink onto it, put a promise on it that you will honor the debt, and get those US Dollars out there.

Reality. Sure it will need to get repaid at some stage, but hey, this is the US Dollar. The world trusts it, and anyway, what options does the World have but to use Dollars? It will all be OK……Did somebody mention the Euro? Opps.

Savings. Maybe the Government should have issued a Savings Bond, and tried to reverse the negative Saving Rate in the US. At least that may have given the public something that they can own, and not just a mortgage on their children’s future.

Children's mortgage? Bear in mind that your $600 is a loan that your children will possibly be paying back for many years.

Imagine if the ECB, or the BoE, the BoC, BoJ or the RBA announced such a scheme; the Euro, Pound, Cad, Yen and Aussie would be on the floor. Long USD? Not whilst this mess is going on.


Jack
TheLFB Team
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