How To Solve Our Unemployment, Economic, and Mortgage Problems
This is NOT a POLITICALLY CORRECT or a serious proposal. Beware!
The Federal Reserve is creating $85,000,000,000 per month of new money to purchase toxic waste (mortgage-backed securities) from banks, support foreign banks, and to purchase US government treasury debt. This assists (bails out) banks, keeps interest rates low, and helps enable the government to continue excessive spending. Supposedly, it will benefit the economy and reduce unemployment. Perhaps another $85,000,000,000 per month, or more, should be used for direct assistance to employ people, assist families, and supplement mortgage payments. If money creation for the banks and government is good, then direct assistance to Americans should be even better.
Problem. The United States has too many unemployed individuals. People need jobs. Let's solve that problem.
Problem. People who purchased a house at inflated prices are reluctant or unable to pay their mortgages, particularly after so many have lost jobs. The banks don't want to foreclose, the people can't/won't pay, and this hurts the economy and the housing market. Let's provide direct help for this problem.
Problem. The economy is sluggish and probably contracting if real inflation numbers are used in the calculation. Let's stimulate the economy with direct assistance to families, not banks.
We know that the Federal Reserve is creating, out of "thin air," about $85,000,000,000 per month to buy mortgage debt (bail out banks) and to buy US government debt (bail out politicians). Let's call this one Federal Reserve Stimulus Unit (FRSU). Such stimulus is widely believed to be good for bankers and politicians. Perhaps similar assistance would also benefit average people.
We know that Congress has sent stimulus checks to taxpayers in the past. It could be done again. We know that Congress has made some effort to help those struggling with mortgage payments, and Congress has created a huge food stamp (SNAP) and welfare program. Those programs could be expanded.
Let's Solve Problems
Unemployment. The United States does not need any additional government employees, so let's use several existing, well-run companies (Fed-Ex, UPS, Google, or many others) and hire say 20,000,000 people to build levies, improve neighborhoods, repair bridges, guard borders, build solar power plants, or whatever. Let the private companies make the decisions, keep the politicians out of the process, and put people to work. Assume the average cost of an employee, including minimal benefits and overhead, is $4,000 per month. Total cost of the program would be about $80,000,000,000 per month - about one Federal Reserve Stimulus Unit. If $85 Billion per month is good for bankers and politicians, then another $80 Billion per month to employ people who need jobs would be even better. Another 20,000,000 people spending money and not collecting unemployment would be good for the economy, increase tax collections, and practically eliminate unemployment.
Mortgages. Many Americans are having trouble paying their mortgages. Assume there are 50,000,000 mortgages in the United States. Many of them are not in trouble, but let's send checks to every person with a mortgage, not just the people who are in need. If we spend another $40,000,000,000 per month on direct mortgage assistance, that would imply a monthly mortgage assistance check, or tax rebate, that could average $800 per family per month. Another $40 Billion per month back into the hands of the people paying bills and mortgages each month would be a huge stimulus to the economy. Let the private companies managing the payouts figure out exactly how to do it and what will work most effectively.
Family economic stimulus. The United States supports about 50 million people per month with either food stamps, welfare, or both. They are already receiving some free benefits, so they could receive a smaller additional stimulus - say one-quarter of what others receive. Gainfully employed individuals are working for their income so they should receive full stimulus. Individuals who earn so little taxable income that they pay no taxes - something like 47% of the populace - could get a smaller stimulus like the food stamp and welfare people. In round numbers, let's assume 50 million food stamp and welfare recipients, another 30 million no-tax individuals who are not already on food stamps or welfare, and another 100 million actual workers paying taxes and struggling to pay bills. Assume full stimulus for 100 million workers plus one-quarter stimulus for another 80 million others. If we create another $50 Billion per month in family stimulus, then each full stimulus would be about $400 per month. This would put another $400 to $800 per month into each working family and add another $100 per month for food stamp and welfare recipients.
Congress. Passing this bill through congress the normal way would take months of negotiating, arranging kickbacks and payoffs, inserting "pork" legislation and so on (politics as usual). Let's expedite the process! Write the Stimulus Bill in less than a week, keep it simple, direct, brief, focused, and "pork" free. Offer each congressperson who votes for it $1,000,000 in cash, and then offer the President and his family $1,000,000 each to obtain his signature. Total cost would be under $500,000,000, which is peanuts compared to the $12,000,000,000 in cash that was airlifted to Iraq and remains largely "unaccounted for." If $12 billion in cash was printed and airlifted to Iraq and accomplished little, printing another $500 million to approve valuable legislation seems like an excellent idea.
Cost for the Plan
|Unemployment||$80 Billion per month (about one FRSU)|
|Mortgage Assistance||$40 Billion per month (about half a FRSU)|
|Family Assistance||$50 Billion per month (about half a FRSU)|
|Congressional Approval||Less than $500 Million in cash (peanuts)|
|Total Cost||About 2 FRSUs per month|
Benefits and Timeline
The bill could be written and passed rapidly if "politics as usual" were circumvented via the cash payoffs. Most Americans would see some direct personal benefit so they would generally be in favor of the plan. Banks and politicians would continue to receive their $85 Billion per month. If that $85 Billion per month is beneficial to the economy, then practically eliminating unemployment would certainly be highly beneficial to the economy and tax collection at all levels. Further, mortgage assistance that actually came to the mortgagees would benefit both people and banks, and direct additional family assistance would benefit most Americans.
All this could be accomplished in short order, without adding more government employees, and for about the cost of two additional FRSUs.
This could be a win-win-win-win solution.
Of course, there is always a downside with government programs. The current FRSU of $85 billion per month will accelerate consumer price inflation, and a 2nd and 3rd FRSU per month will probably make it worse. Regardless, the Federal Reserve has already created $ Trillions (injecting liquidity into the financial system); and a Nobel Prize winning economist has strongly encouraged increased "money printing," so the consumer price inflation issue appears unimportant to economists, central bankers, and politicians. It seems pretty clear that creating one FRSU per month is good for banks and the stock market but not for average Americans. Hence, an extension of the program and more FRSUs per month in direct assistance to average Americans is worthy of consideration.
If this additional stimulus is not sufficiently effective or if Congress believes there is a need for another round of stimulus, the Federal Reserve could organize a helicopter drop of freshly printed $100 bills over large urban areas in time for the next Congressional election in 2014. We airlifted $12,000,000,000 in shrink-wrapped cash to Iraq - we could follow that precedent and airlift $100,000,000 in freshly printed $100 bills to each of 120 American cities and let the police and firemen distribute them - just speculating...
Of course, the additional money printing will reduce the purchasing power of the dollar and that will drive the prices for gold, silver, gasoline, food, electricity, and most other commodities much higher, but ... the Fed is currently printing money anyway and so are most other central banks. If creating a $ Trillion a year is good, then why not double or triple it? And if creating a $ Trillion per year is not good, why are we doing it?
Clearly, QE 4 and more QE are necessary (official story). So let's double up on the FRSUs and solve important problems!
And while we are solving problems, please read Why Buy Gold? Then we should buy real assets to protect ourselves from the accelerating consumer price inflation and loss of purchasing power.