The federal stimulus package of 1.7 trillion dollars has been thrown into the economy.
This is the equivalent of swimming against the current when caught in a Rip Tide. It is only natural for a swimmer to want to go back to the shore when he finds himself being dragged out into the dangerous sea.
The average swimmer will turn and swim madly for the beach, not knowing that he is doing the worst possible thing. As he swims fiercely, he rapidly loses strength. Unless he is lucky enough to have moved out of the rip current, he will often die by drowning.
Governments are no different than swimmers. When caught in an economic rip tide, they want to go back in time. to the period when the economy was booming. They do not swim faster, they throw money faster.
Unfortunately, like the swimmer, they do not do take the correct action of moving out of the current, they go straight for the shore. They throw their money at the people who lost money: the banks and financial institutions.
These are the firms that racked up the trillions in debt. They are sinking. Instead of letting them sink the government attempts to bail them out. Fatal mistake.
BERNANKE AND THE FED
The Fed Chief, Bernanke, testified that the economy was “stabilizing” but that he was unsure of what would happen with commercial real estate loans.
We know that they will hit the banks like mortar shells.
This massive real estate development was unnecessary and has no use in this economy. It was part of the madness of 2006 and 2007. When these loans come due, they will require the Treasury to inject trillions of dollars more, to save the banking system
Debt will grow again and the country will start to drown.
WHERE TO PUT THE MONEY
Governments do not like to give money to the public. The public is the source of all governmental money, but the government is run by people who normally steal that money.
In this case, however, if the money is not given to the people directly, the government will be thrown out.
There is no other solution to the present disaster. The people are rapidly losing their income because of growing unemployment. They will force closure of all business that relies on retail purchases and ultimately, all business relies on retail purchases.
The government will be forced to make payments to the public at large or they will be faced with a new form of government.
This occurred in history many times.
We see the famous French Revolution when aristocracy was removed for the first time as the Republic came into being. We saw it again Spain and in Great Britain as their aristocracies fell. We saw it in Europe in the 1930′s as dictators took over the realms of government. We are witnessing it today in China as communism rules where the business elites failed.
Swimming against the current is impossible. The force of nature is overwhelming and the economies of countries are a manifestation of that force.