Like most everyone, I have been sitting on the sidelines, biting my nails, listening to all the debates surrounding how to end the economic crisis. I am not comforted by anything I have heard up to now.
I am just not sure there is a sure-fire way to kick start the economy. The issue, at the end of the day, is about our thirst for stuff (to borrow a phrase from the late George Carlin). For a long time, we all were acquiring more and more stuff, borrowing more and more money to get bigger and bigger stuff. We were able to do this, because we were employed by companies making this stuff, or selling this stuff, or shipping addons and doodads for our stuff.
Somewhere along the line, a lot of people discovered they couldn’t pay for all their stuff. The cost increased (adjustable rate mortgage) and the value went down (home devaluation) so people defaulted on their loans. Someone woke up and realized “holy crap, I own all these loans!”. So when the word got out, no one would lend them or their friends any more money, and their company’s value plummeted. Investors panicked, and wanted their money. The holders of these “Toxic investments” lost value, and confidence, and investors, and so on. The fear spread, and confidence went into the toilet. Now, people are holding on to their money out of fear, so buying grinds to a halt. Catch 22 (thank you Joseph Heller).
So what’s the answer? Beats me. I don’t think that the rescue lies with Enterpreneurs creating new jobs in new industries. I think the answer is partially infusing money into existing businesses, so that they might add workers. The problem is they will not add workers until they know that demand has returned. Giving me a tax cut won’t convince me to buy a new car. I’ll bank it. But the bank won’t lend it, so were back to square one.
So GM, cut the price of your cars in half, and ship them to China and India. Government, chip away at trade restrictions in foreign markets. Banks, lend the money necessary to establish a larger beachhead in those markets. Let’s pack these cars with all the latest cellphone-gps-bluetooth technology. Volume sales will make the pricing profitable.
The point of this is to underline the fact that we have overproduced for ourselves, over purchased, under-saved, and now we don’t trust the future. That’s bad. We have too much stuff on the shelves. One solution is another market. But it won’t be there for long.