In the Daily Journal toady, I discovered that of the 700 billion dollars stimulus that was enacted on October 3, 335 billion dollars have already been spent. Here are the statistics
250 billion $ for capital infusions to banks (although government receives partial ownership stakes)
25 billion for Citigroup
40 billion dollars to help American International group
and 20$ billion went to the Federal Reserve
Originally Treasury Secretary Henry Paulson's strategy was to buy rottent mortages and other bad debts to free up balance sheets and spur lending however, he chose to abandon this rescue strategy and lawmaker have blasted him for it. They claim that this shift in strategy is sending confusing signals to the public hurting confidence in the government's abilities.
Overall, this does not seem to be working. Half has already been used up and it doesn't seem to be making any significant differences. Jobs are still being slashed, companies are still filing bankrupcy and i don't know if this stimulus is really making a difference. It seems very likely that more needs to be done to stop this recession
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16 comments:
Although I'm sure that more needs to be done to help the economy recover, the $700 billion should be enough to get us back on track. I disagree with Jesse that the $335 billion hasn't worked. Actually, I think it has helped a lot, we just haven't felt the change personally. It will take time for the economy to be restored...it has only been two months since the money was even given. I say we should give people in Washington a break...they're doing the best they can. Also, I don't find it surprising that nearly half of the money has been spent already. The economy is pretty bad and people want instant relief. Hopefully this need for instant relief will subside in a couple of weeks and the money will be allocated slower...otherwise, we're doomed!! We can't afford to put in more money for this cause, or else other programs will begin to suffer. What will happen to education? It's already suffering enough!
I really don't know where this economy is headed. I've heard both that the bailout is and isn't working, and I'm not sure what to believe. I think that there is no way the bailout could NOT help the economy somehow, but I'm not sure that it's being spent very wisely. The money is being spent in a hurry because, as Anastasia said, people want instant relief. I think America needs to suck it up for a little longer and give the government time to put that money exactly where it needs to go.
Also, the actual economic benefits are definitely going to take some time. Banks will have to start lending again, then people will have to start taking out loans and buying houses and such before we see the upturn. That's not coming any time soon.
Ok, imagine you've just been bitten by a king cobra. Do you think you would want to wait around and only inject yourself with 5% of the possible antidote, and then wait and see what happens? No, that sir is how you get yourself killed. If you indeed did get a cobra bite, you would be trying everything you could get your hands on in order to slow that venom and test any antidote possible even if it has a slightly negative side effect, heck, even if the antidote is 50/50 live or die, you would try it, because doing nothing is the worst thing you could possibly do.
Same theory applies to this crisis. You do nothing and wait for the perfect solution, and your solution will just magically arrive? Sure the right plan might eventually come around, but for right now, we're gonna have to stick with the bailout because it's currently the only plan we've got. I mean unless you've got a better plan, but if you did, then shouldn't you be in DC?
The bailout cannot help the economy. Propping up failing companies will only make the economy worse. There is a reason these companies failed.
Also you must remember that every dollar the government spends is either taken from the people or printed (causing inflation).
What's funny is that the perfect solution is waiting and doing nothing. The markets need to correct themselves, but the government continually distorts the market by doing things like this bailout.
The bailout makes the economy worse.
I think george's analogy to the king cobra bite is quite interesting, but i don't quite agree with it. I feel that if we just try any solution, and that solution causes our economy to come out even worse, the government will have to find even more money to fix those "negative side effects". And like ballin4life and anastasia said, that money will have to come from us or other important programs like education. I'm not saying that the people who drew up the bailout is just throwing our money out there and hoping the economy will get better, and I honestly have no idea what the best way of helping the economy is, but I feel that giving money to failed banks is not the best idea. They obviously failed, so why do they deserve to get more money?
People, we were not going to come out of this crisis alive if we had not proposed the bailout. Sure, it may not be the best course of action, but remember that the numbers before the bailout showed that by the middle November period our stock markets would have been turned into zilch, nada, ling, ZERO. Face it, our economy was falling at an exponential rate, seriously it was on an path straight down, and this is coming from a guy who wakes up at 4 to check stocks.
Is waiting for the economy really the perfect solution? do you think investors can just all sudden wise up after YEARS of selling?? do you think we have the luxury of waiting? Sure, the companies might not deserve it, heck they don't deserve it, and sure the US economy is still in the game right now, but just think if congress had just waited 15 more days.... check the downward spiraling plummet of death in the DOW Jones industrial average.
The economy is one of the cornerstones of american society, if it falls the entirety of america suffers. If the economy crashes, i don't care how low the education bdget is right now but it very well may become nonexistant.
um wrong. the bailout has done NOTHING, just a big fat waste of money. and how are you going to tell me that Capitalist America needs a freakin bailout to improve the economy? Every recession has been undone and not because of a socialist like bailout plan. the economy runs itself, its that simple. people survive if they work hard and make enough money, its that simple. the government cannot do anything to help out except maybe create the appearance that it is getting money by lending out money from the federal reserve.
that money, however, is fake and the economy will come crashing down again. the New Deal didnt work, and neither is any money from the government. THEY ARNT CONNECTED. people rely way too much on the government and look to it for answers to everything, but it isnt all powerful. the economy works on its own, its a fact. regulation has never and will never work, neither has throwing a bunch of fake money at a dying economy.
I think the money has to have done SOMETHING. Just because it hasn't created new jobs or dug us out of the hole that we dug in the first place doesn't mean it hasn't done anything. That 335 million bailedout failing banks. I'm sure the rest of the money will be spent wisely and hopefully will do our economy some good.
Don't freak out guys. Obama has a plan to create new jobs. Obviously bailling out banks is not the only thing the government can do to help our economy.
It was never really a surprise to me that this problem needs to be fixed by doing more than just throwing a ton of money at the economy. Hopefully Obama's plans that will make more jobs will help us get out of this alive (i.e. in our lifetime).
Maybe the cost of having a different country with all of the US's freedom is having no money....
Aaron, then you suggest we should rally up world war 3? Sure, the New Deal didn't help us out of the depression as much as World War 2, but even if the war had never begun, but you bet it was helping put money into the hands of the workers and banks and therefore bringing the economy back. AND NOOOOOOOOOO.... the economy does sometimes NEED a stimulus package to help boost itself back.
In the Panic of 1907 if not for JP Morgan and Theodore Roosevelt's agreement to have federal acquisitions of companies, the slight panic would have become a full blown crash.
In the crash of 1987 (also known as Black Monday) the stock markets around the world crashed, and it was only due to the federal reserve and other central banks pumping money into the system that total destruction was averted.
Further more, the great depression wasn't only saved by WWII, if you look, you MIGHT ACTUALLY SEE that the stocks only caught back up to pre 1929 levels in 1954, almost NINE YEARS after WWII, which means that the policies set down by the New Deal presidents did indeed help, which means that government creating jobs is the BIGGEST HELP which is, ummmm... kinda like socialism.
Please get your facts straight and offer a course of action other than wait and do nothing... as i am tired of hearing that over and over again............
I agree that current bailout doesn't seem to be producing any significant improvements, but like Obama has been repeatedly saying, "the economy will only get worse before it gets better." Americans can't expect problems to magically fix themselves in a few months. As part of his economic recovery plan, obama says that he plans to save or create 2.5 million jobs over the course of 2 years, cut pork barrel spending, and help homeowners facing foreclosure. Hopefully his plans will prove successful in our near future.
I really liked your Cobra analogy, George. :D
But the bailout is done. We can't travel back in time. We're not like Hiro Nakamura (sorry I just watched Heroes.) I don't believe that feeding businesses more money is the right thing to do. It feels like we're only propping them up for an even greater fall. Delaying the inevitable, sort of.
But it's really too early to tell. And neither side can really say it was 100% good or bad, because we may never know what would have happened if we did not bailout those businesses. We have our own beliefs for now but isn't it a bit too early to tell if the bailout was effective or not?
GChang,
World War 2 didn't pull the country out of recession either. Wars simply destroy resources, they hurt economic growth.
Also, if you think about it logically, there is no way that a stimulus package can help the economy. The money is either taken from the people, who would have chosen for themselves how to use it, or it is created from thin air, which leads to inflation. I don't know enough about those examples to comment but I highly doubt that government involvement helped in either case. Not to mention that government involvement in the markets almost certainly caused the crisis in the first place.
The New Deal made the depression last the entire decade of the 1930s. The fact that stocks only reached their 1929 high in 1954 is definitely not evidence that the New Deal was helpful (more like the opposite).
Furthermore, creating jobs is not the government's job, and creating jobs does not necessarily help the economy. It only helps if these jobs are actually productive and profitable. The government creating jobs is harmful because the government gets its money from the people, and the free market would allocate this money much more efficiently than the government.
Would you support the government paying all the unemployed people to dig holes and fill them in again? This would create many jobs, but since the jobs are unproductive, they would harm the economy as the government diverts resources from the free market.
Meanwhile, the New Deal has also created lasting problems in our society, like Social Security, which will soon be a cost that the government cannot afford.
Also, every bust is created by the government's monetary policy and its support of fractional reserve banking.
Why would someone give a course of action other than do nothing when doing nothing is clearly the best course of action?
So yeah, on getting facts straight. You didn't show anything from aaron's post that was incorrect.
world war three? i dont think i mentioned war at all. Im not suggesting that the economy is doomed forever and we should sit on our behinds and do nothing. but as a high school student, i can guarentee you there is nothing i can do about the economy until i gruaduate buisness school and five years later become the CEO of a major coporation. Because the economy lays in the hands of the buisnesses, banks, and stock markets, certainly not the White House.
Good buisness succeeds, there is your bailout plan, Actually run a buisness that is succesful and can keep their company out of the tank. that is what im suggesting this country does. as evience of the bailout plan, government does not work, it doesnt.
the federal reserve aquiring companies in 1907 was a step towards socialism and a bad idea. those companies deserved to die and should have. there was no need for the federal reserve to stick its ugly head in the way because the economy does crash, its how bad companies get weeded out. why do you want a bunch irresponsible, poorly run coorparations heading America's finance? thats what the government keeps alive.
Black monday was a joke and was one of the primary reasons why our economy is failing now, because the federal reserve pumped a bunch of fake money into the economy and caused irresponsible manageablility because of the false impression that the economy was rising.
RE: ballin4life:
First, wars do help economies. World War II mobilized billions of dollars for many industries, creating jobs, and giving people a productive purpose. Would I start a war to help the economy? Of course not, but Orwell's 1984 was not too off the ball.
Second, with regards to pointless government jobs: I agree that it would be preferable that people have productive jobs. However, if the government is giving people money, they are spending it. Social security prevented the elderly from becoming an underclass. Such Keynsian principles did work in the Great Depression. While I am not advocating doing that today, it did work in the 1930s and 40s.
Scott,
No, Orwell's 1984 shows that wars actually hurt the economy. The whole purpose of the war in 1984 is to eat up resources so no one's standard of living can increase. Wars destroy resources that could have been put to better use.
Keynesian principles didn't work in the 1930s. They made the economy worse. Every job the government gives out is a job financed by the taxpayers (or by printing money). The free market would have allocated the dollars much more efficiently than the government. Meanwhile the government must create a wasteful bureacracy to do anything.
Social Security is a giant ponzi scheme. That first generation of elderly got social security benefits without ever paying in. Social Security has caused and will continue to cause huge financial problems. The government should encourage people to save money for retirement instead. If someone doesn't save, then they should have to work longer before they can retire. Not to mention that social security at this point hardly provides enough to live on anyway.
The source of economic growth is saving and investing money (to make new things that people want), not consumption.
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