All have put their marks on what to do about what someone said was one quadrillion of debt hanging over our heads, ready to drop on our country like a comet from deep space…

Sploosh.

Dodd’s bill is supposedly 44 pages*, Paulson’s is who knows how big. Burris is one page…

When faced with a large volume of legislation, one’s first reaction should be “what are they trying to hide”. Equally important is to consider on the other hand, when presented with one sheet of paper, one should question what is getting swept under the “broad brush” and will cause greater problems later..

If you wipe everything off the table and look at each other across a blank space… the answer is obvious… Pick a spot ten years from now and work backwards as to which alternative will cost us the least….

Ok.. so will it cost us less to bail out the bad loans, or let them fail and build us out of a Great Depression… When you look at the last Great Depression, we can still see some of its legacy.. The TVA, Hoover Dam, Golden Gate Bridge, Empire State Building, windbreaks across the Midwest, as well as walking thorough any small town in America and reading the building cornerstones proudly displaying the numbers 1930 something ….

Looking across the table at each other, one must consider whether we will be better to spend 700 billion on things we can see, that work for us, or on securities that can lose value again…if they ever regain it.

Do we hit bottom and build ourselves up… or to we float in a payment due limbo land where we never have enough money to make ourselves a better nation… We are making payments back on bad debt.

Is it in our best interests?

If you are one holding that debt, yes, it will save your ass… You will clear the debt off of your books, and you can again begin showing the money you are actually making, which is unchanged, as a profit and not a payment back on some bad debts… This is bankruptcy protection under a different name. Bankruptcy protection is an American tradition, one that is considered scandalous until it becomes the best option available…. But instead of saying these banks will not pay, you’re out… we are saying these banks will not pay, your government will…..

Now if that relaxes fears and those mortgages continue to get paid by consumers to banks, costing our nation less than the line of credit we are extending them, then this policy is sound and we mover forward with little pain. But if those mortgages are not paid, we citizens get 800 billion less than we can spend on anything else…. That is the cost of the Iraq war so far. That is interestingly the same amount of our national debt owned by China….

Jumping ahead, we need to figure out from which arena it’s best to drive our economy forward… Our government?  Or the private sector?

What we know from history, is that during the last Great Depression, the Great Depression did not rise out of its doldrums until we mobilized our nation against the Germans and Japanese…… So that speaks volumes against allowing our government to build us up…

What we also know from history, is that sometimes without government intervention, depressions caused by bubbles bursting in air, last thirty, forty, and sometimes result in a conqueror wandering in and taking advantage of the economic weakness and inability of that nation to provide for the common defense….

So let’s look: Where is the Money?

The government prints money; it doesn’t earn it.   Workers spend money.   They earned it.   Businesses don’t print money, they don’t earn money, they provide services for which money is spent.  They transfer that money taken in,… to those employees responsible for those services which they sold… They keep some for themselves, so they too can buy groceries.

When people have more money than they need to live, the economy is considered to be stable and growing. When people have less money then they need to live on, the economy is in bad shape….

Above is the basic economy broken down in it simplest form.. There is a part missing…. Can you guess which?

Stocks… or what is more appropriate, the “virtual economy”.  One can live and die there as well.

It is best explained by an example… Assume I am living comfortably today, and after deducting all my fixed cost expenses, food, shelter, transportation, utilities, etc. I have some money left over… I could put it in my mattress, but that does no one any good and the crackling noise while sleeping tends to itch me and keep me awake… Instead I choose to invest that money in a new venture called Delaware Talk Radio…. Perhaps when I someday ask for my money back, I will get more than I put in… At least that is my expectation….

Now because I was willing to part with my mattress money, this new venture Delaware Talk Radio gets off the ground; the hardware is bought, the employees get paid, and the ad revenue starts flowing into the pot…. From that pot, once a month loan payments are made to cover the amounts pre-funded…. If the business earns more than it pays out, it is successful….. So because of my little bit of pocket change, and the graciousness of the financial institution assisting the operation, several people now have jobs that were not there before, and can now buy licorice at the local Food Lion… Also those companies selling the technical equipment required for this venture, grease the economy’s wheels with the payments Delaware Talk Radio has given them…

Now, on paper,  the same can be done if the government chooses to build a giant skyscraper in say …Russell, Kansas… For fun, let’s call it the Tower of Babel…. The Government demands taxes from its constituents, meaning that less money on each person’s local front is now available for spending in their local economy. Nevertheless, that money is still collected and then used to hire people, contractors, materials. Those receiving some of this government money then spend their income on those things they need. The economy around Russell, Kansas does fine… Their A & W Root Beer Stand, as well as their Dairy Queen, become number one in each of their companies…. slowly the money flows outward to other localities funneling goods and services toward Russell, Kansas.

The difference is how fast.

Can one better develop a new bacteria within a laboratory, or by letting nature take its course in a swamp….

The necessary mutations occur at a greater rate in the natural swamp… just by the sheer numbers of transactions…

The conclusion I got from writing this was actually the opposite of where I thought I was going when I began… Billions of tiny little transactions have more economic power than great single works of power… To pull us out of the next Great Depression we must drop all pretense and choose a path that will optimally benefit us at some point in 10 years time….

History offers us the template which demands it… This great experiment which I mentioned above, was tried out over the course of the last one… Great Depression that is….

Our nation chose the free enterprise system…. The Soviets chose the government approach….. We borrowed tons of money to pay contractors during WWII…and that put Americans to work and flooded our economy with dollars… The Soviets put their limited resources into government enterprises, and have only just recently pulled themselves out of their Great Depression , under Putin’s oil driven private investment plans…..

Spread the risk among as many participants as is possible. Funnel the money to the ground floor.

Doing what is best for private investment, seems to be the best way to dig ourselves out of our hole.

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