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Economic Stimulus

by J.Peter

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So, this is about the millionth blog post on the topic but I just wanted to throw in my $.02.

The government is talking about sending me an $1800 check. $600 for me $600 for my wife and $300 for each of my two children. I think it is a great idea! We’ll probably use it to build up our savings for some future purchases and emergency situations. We certainly won’t rush out and spend it right away like economists (politicians) would like us to. So I ask the ever popular question: Does that make me a bad american? Or a smart consumer?

A recent AOL poll, to which over 400,000 people responded says that 69% of americans would use the money to pay bills, 21% would save it, 13% would spend it and the rest are unsure. Fact is that of those 80% (bill payers & savers) most of them won’t be saving it for more than a couple of days before they find something to spend it on, or they’ll use it to pay off their credit card bills, freeing up more of their credit limit so they can put themselves right back in debt, but if we all do what we say than the package won’t work. I don’t care, I’ll take the money.

I personally think the economy is over inflated. Consumers have been using credit to over extend themselves and purchase all kinds of durable goods fooling the producers into thinking the economy is stronger than it is. All this artificial spending with money that consumers don’t really have, has caused the economy to grow artificially.

The final result is that banks over extended themselves. With too much confidence they leant money to irresponsible individuals (maybe they misrepresented the type of loans they were offering, maybe they didn’t.) Now credit is harder to get, and since it was money on credit that were consumers were spending, there is less money to be spent. Or, actually there is the same amount of money, it is just in more responsible hands. As a result there is less spending.

Spending returns to more realistic levels and the economy returns to where it should be. Until the government puts billions of dollars into irresponsible hands again to create some more “false security” in the market. Fact is the government should use those billions to pay down debt, like I’ll be doing instead of incurring additional debt to continue propagating the idea that the american economy is stable with gazillions of dollars of debt.

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