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What can we do to save our economy?

This is a post from Hello Suckers

dollarbills As the president-elect Barack Obama said; “It will not be any quick easy fix…” he was very right about it. [tag]FED[/tag] took some not easy, but wrong steps at the beginning of this crisis, which prolonged this agony and started the drop-down spiral, the exact same way as what Japan did in 90’s.

This is exactly what Jim Jubak was saying in his paragraph Is US entering Japan’s nightmare? in January 2008. At that time everybody believed that the FED’s effort would help to fix the problem quickly. I was wrong too. I believed the [tag]economy[/tag] is strong enough to overcome troubles and get back on track. In January 2008 it has been about 12 months since the [tag]crisis[/tag] started. Books say that the average [tag]bear market[/tag] takes 14 to 18 months. Now it is obvious that we are not in an [tag]average bear market[/tag]. So why would I be so pessimistic as Jim in his article, right?

What can we do as common citizens of this country to help fix it? Some say stop purchasing products from abroad, stop buying products made of [tag]crude oil[/tag] we have to buy from countries which do not like us. These people mean stop burning oil in cars and use [tag]alternative fuels[/tag] such as [tag]ethanol[/tag]. This segment of the economy is not the majority which would save the it. If we want to stop buying products which uses crude oil, it is not only our fuels in our cars and heating our homes. All plastics – computers, keyboards, cosmetic products – almost everything from soap to even lipsticks, outfit and clothing products – all synthetic fibers and many, many other products are made from crude oil. It is nice to be patriot, but this is not the way we want to go.

What can we do to fix our economy? This economy stands on [tag]consumers’ spending[/tag], so we should start spending again to boost the economy. Easy said, difficult to even think about it. A lot of people are scared to spend money in these bad times. You never know when you loose your job so everybody is trying to save instead of spend money.

We cannot do much about this situation except pushing our congressmen to help. When you take a look at the [tag]interest rate[/tag], do you think that everything is alright? How many of you could get a [tag]loan[/tag] recently with an interest rate at 3% or even 2%? How many credit card companies decreased their interest rates from 14% – 22% to 5% – 11% for example? I haven’t seen any. My recent fixed mortgage rate was at 6.1% or so. Financial system gets money from FED at 1% rate, so except on some loans “interest only”, I haven’t noticed any changes in banks’ behavior, have you? Banks are reluctant to lend you a penny these days. So what can we do about it?

We live in capitalism and it is not a hippie paradise of love. We cannot expect banks and other financial sharks to change themselves and start doing something different from making a lot of money. You don’t even want to change their behavior either, because on the other hand you may be a small stock holder and you want “your company” making you money. There shall be some equilibrium however. If the banks are taking federal money, these shall be used not to fix their own balance sheets by buying bonds, but providing more loans to support consumers’ spending and start the market turning again. Unfortunately the Government is now the only authority which can set those rules and enforce them. I am not a big fan of a strong Government involved in economy regulating it too much (just one step to socialism and communism or dictatorship), but in this occasion I must agree that temporary regulation (until taxpayers money are used) needs to be enforced.

Unfortunately Americans mostly do the right opposite from what they should do: save money in good times and spend them in bad times to support economy. There are many other aspects in this mess and I am not an economist able to tell you the right way. The issue is not just black and white and it will not be an easy quick fix.

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