How far can the totals go? Federal Reserve Chairman Ben Bernanke testified before the Senate Budget Committee on March 3, 2009. He believes that the markets will be “quite able” to absorb the debt issued by the US government over the next couple of years to cover all the bailout and stimulus payments “if there is confidence that the US will get it [the economy] under control.” When Senator Lindsey Graham (R-SC) suggested an “outer limit” at which the national debt was three times gross domestic product, Bernanke said that “it wouldn’t happen because things would break down before that.” They’ll be lending to homeowners who have higher debt ratios than that. Frankly, I’d rather lend to the US government at that ratio, and I suspect a lot of investors – both domestic and foreign – feel the same way.
On the one hand, Bernanke spoke like a “Master of the Universe” when he told the Senators that he wasn’t worried that printing all this extra money would generate future inflation. He said that when the economy begins to grow again, the Federal Reserve is “very comfortable” they will be able to deflate their bloated balance sheet. On the other hand, he did not sound like a Federal Reserve Chairman when Bernanke said “We don’t know for sure what the future will bring.” Of the two Bernankes I like the second one better: no one knows exactly what the future will bring. Why pretend that you know what the best action to take three years from now will be – or what impact it will have. I find it disconcerting, to say the least.
There are a few things we can watch for in the coming weeks and months. The President’s budget came out yesterday and will go through Congress now for approval. Don’t get too distracted by it though – virtually everything in it can change. Instead, work with what you know. The stimulus package was passed and the states are getting details now on how much and for what they can expect money from Washington. Focus on where that money is going. The best way to minimize the damage being done by the Federal Reserve’s printing presses is to be sure that money is spent in the real economy. That means roads, bridges, schools, sewer systems – and not research and development on sources of alternative fuel or studies on global warming. We are in the middle of a crisis. This is not the time to spend on wishes and dreams. If the money is spent on real infrastructure projects, it can help to mitigate the potential inflationary effects later.
The Treasury and the Federal Reserve have no choice but to keep their foot planted fully on the accelerator. Setting infrastructure in place now means we’ll get good traction later when the economy starts moving forward.
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In this world where the
In this world where the economy is at its struggling state and the amount of prices are expanding, it is really important to keep our social security safe and ready at all times. But now that a lot of social security scams and identity theft become one of the fastest growing crimes in America, protection of our personal information is very crucial. That person can use your Social Security number to get other personal information about you. You might not believe that even celebrities can do that. One great example is Antwon Tanner who is known for his role on One Tree Hill. He has been busted for running a Social Security scam, selling fake social security numbers. Evidently, no installment loans could cover his needs but regardless, he was found out and arrested by Immigrations and Customs officers. He is set to begin trial at a later date, and he is currently free on bond. Antwon Tanner will need some installment loans now to afford a lawyer good enough to keep him out of Federal Prison.
encourage savings and investing to reduce bank failures
The federal government and state governments should stop taxing interest from savings accounts, dividends, capital gains, and estates.
Many small banks may do a lot better.
Many big banks may be less likely to fail.
The 401(k) plans and Roth IRAs of many people may do a lot better.
Pension funds of government employees may do a lot better.
Many 401(k) plans and pension funds of government employees have significant investments in financial companies.
Many people may have an easier time making mortgage payments, reducing their debts, and buying things.
Many businesses may have an easier time reducing their debts.
Many businesses may have an easier time obtaining loans and investments.
Consumer confidence may significantly increase which could encourage more people and businesses to spend money.
I highly recommend people read
"Join Me On a Mission" by Christopher Thompson
http://catch22solutions.typepad.com/catch_22_solutions_blog/2009/02/join...
I discuss some changes to social security and other topics that may improve the economy over time on http://www.newgeography.com/users/kenstremsky
Sincerely,
Ken Stremsky
Put more money in the market? Seriously?
I'd like to know what you've invested your retirement money in that you think that putting more money were it earns dividends is a good idea! You write "Social Security might want to buy stock in many small companies in many countries." Seriously? Social Security isn't underfunded enough that you think losing 50% of the value in the stock market would be a good idea? Really? Are you even paying attention?
You are way off-topic.
It is about long term investing and thinking about consequences
I appreciate the feedback.
I mentioned 401(k) plans and Roth IRAs on my previous comments. The changes I recommend on my profile dealing with 401(k) plans may benefit poor people and middle class people a lot. You might like them and want to support them.
What do you recommend people do to have a more secure retirement? Do you think just saving money in US currency is a good idea? Does hyperinflation worry you?
I recommend you read
"The Joys of Hyperinflation" by Gary Gibson
http://www.whiskeyandgunpowder.com/the-joys-of-hyperinflation
Do you think people should think ahead 3 years from now? Do you think we would be in this mess now if Congress had thought about how much harm no money down mortgages and mortgage backed securities based on no money down mortgages might cause? Do you think people should learn from the past or do you think people should make worse mistakes? Our elected leaders should think about possible negative consequences. Our elected leaders SHOULD HAVE learned from the Savings and Loans Crisis. I watched discussions about the Savings and Loans Crisis many years ago. People should have voted for COMPETENT people instead of fools. Businesses need to think ahead some to stay in business. People need to think about how government decisions on taxes and other things may impact them.
The topic is dealing with the financial crisis. I discuss in great detail dealing with the financial crisis with many different solutions.
Who creates jobs?
The private sector.
Can government spending help create jobs? Yes
Can government spending harm job creation? Yes. If government spending harms consumer confidence, it may cause job losses.
The stupidest thing to do in a financial crisis like we are experiencing now is to increase the capital gains tax and the corporate tax rate or threaten to do so. Do you want to reduce capital flight or do you want to increase capital flight? Businesses need capital to stay in business. Do you think the federal government and state governments not taxing interest from savings accounts, dividends, capital gains, and estates will reduce capital flight? What do businesses need to stay in business?
If our country and other countries encourage investing over time,
social security may do better. I discuss many topics dealing with social security on my profile and on http://www.myspace.com/kennethstremsky. We can not just use the social security tax to fund social security. I discuss many different ways of funding social security.
It is about jobs in the private sector and helping people have more secure retirements. If the federal government and state governments stop taxing interest from savings accounts, dividends, capital gains, and estates, many people will have less need for social security. If people are encouraged to invest, stocks are likely to do better over time. Our country punishes people and businesses for creating wealth. If the highest federal income tax on individuals is NOT greater than 15 percent and the highest federal corporate tax rate is not greater than 15 percent, our economy is likely to grow a lot and many jobs are likely to be created. What do you think is more likely to create jobs short term and long term - government spending or taxation reductions on savings and investments that encourage job creation?
The less that the federal government taxes individuals and businesses the more that state governments may be able to tax individuals and businesses. State governments may obtain better results spending money on infrastructure than the federal government.
Circuit City and many other businesses have gone out of business. The more businesses that fire people the more businesses that may fire people. Infrastructure spending makes a lot of sense especially when it is being done by state governments. The infrastructure spending is not going to be creating a lot of jobs in small businesses for a while. We need to save jobs now.
Having social security invest in many small businesses may help a lot of people keep their jobs and may help a lot of jobs be created. The more people who are employed the more people paying social security taxes. The more people who are fired the fewer people paying into social security.
Consumer confidence keeps falling because not much of anything has been done to increase the odds that small businesses and other businesses will hire people. Reducing social security taxes for the next 2 years on many people making less than $30,000 is likely to improve consumer confidence.
The Federal Reserve printing money like crazy does not improve consumer confidence. It discourages consumer confidence. Congress should eliminate the Federal Reserve or veto many of its decisions.
I recommend you read
"You Can't Soak the Rich" by David Ransom
http://online.wsj.com/article/SB121124460502305693.html?mod=djemEditoria...
"China: The Hope of the World Economy?" by Bill Bonner
http://www.dailyreckoning.com/China-the-hope-of-the-world-economy
I discuss placing the social security tax on all wages people make in a year above $30,000.
Congress caused the financial crisis by not having competent government regulation.
Congress should have learned from the Savings and Loans Crisis. Congress should have required down payments on homes and fixed rate mortgages. Allowing mortgage backed securities to be sold based on no money down mortgages was nuts.
Our national debt was less than 1 trillion dollars on January 20, 1981. Our national debt is now more than 10 trillion dollars. The sales taxes I recommend would help the federal government reduce the national debt over time. Some of the sales taxes Democrats used to support.
Sincerely,
Ken Stremsky