Demand has to happen FIRST...

[SoCalDem]

No matter how much "stimulus" happens, companies hire based on demand for the product or service they produce.

Employers who receive financial help from the government to stay afloat, will NOT hire new people with that money, if there is no reason to hire them.. They will use that bail-out money to keep paying themselves, shareholders & upkeep on their facility, but they will NOT just hire new people to create "stuff" that no one wants to buy..

Right now there is a GLUT of "stuff" to be bought, but there is also a serious amount of debt for "stuff" people bought a while ago (for some...years' worth of stuff), and at the same time, there is a shortage of money in those same households. Add a whopping dose of FEAR of spending, and we are where we are..

If you owned a company that made 5000 whatevers a year, and you only had orders for 1000, would you hire more people to make more whatevers?

All the fancy maneuvers will not help until the issue of consumer debt is addressed.. It remains right where it's been, lurking in the background.

If a family has $10K of credit card debt and a car loan or two, a $1000.00 check is a drop in the bucket, and probably would not even make a dent in their financial nightmare.

Until main street "gets solvent", and gets off the credit merry-go-round, there will be little demand for "stuff".

[Veritas_et_Aequitas]

1. They're running on an economic concept: Say's Law.

Briefly put, Say's Law (named for Jean-Baptiste Say) states that a supply will create its own demand. Thus saith Wiki:

According to Say's Law, the production of goods provides the means to the producers to purchase what is produced, and hence, demand will grow as supply grows. For this reason, prosperity should be increased by stimulating production, not consumption. Another implication of Say's Law is that the creation of more money simply results in inflation; more money demanding the same quantity of goods does not create an increase in real demand.

If this all sounds familiar, it should. Say's Law is a chief tenet of supply-side economics (and ironically, Say wouldn't totally agree with the law named for him).

But as you deftly pointed out, right now there's a lot of stuff out there with no demand. Until we wash our collective hands of supply-side economics, we're going to keep seeing these tired old attempts to fix our situation.*


* To be honest, I think it might work. But in order for it to work, the stimulus would have to be massive; individual tax payers would need more than a paltry $500 to make a change in our current situation.

[terisan]

3. So if Detroit builds more cars people don;t want, eventually people will buy them because they are

available?Detroit sold suvs for years. ....and if they still do not buy them the government can order a tax credit to the buyers to make it an attractive deal. I know that is how suvs got sold for several years. A business got a full tax credit for buying each one and accountant told them to go for it.

[Veritas_et_Aequitas]

5. Yeah, that's the theory. It's not a particularly good one, but it's how we've been running

more or less since Reagan.

[dysfunctional press]

14. those tax cuts were on the biggest suv's- and they were written for farm equipment...

but hummers and the largest of the large suv's were heavy enough to qualify for the tax break, which was based on vehicle weight.

[terisan]

6. Have they already created more money and they think that they should not increase demand.

[Veritas_et_Aequitas]

13. After doing some checking

1) Well, technically "money" is always being created by the lending process, but more to the point, no. The Fed's not interested in printing more money. Printing more money has to be handled almost perfectly, or there can be some real catastrophic consequences. In recent history, the 1990s recessions in Mexico and Argentina were aggravated by botched attempts to devalue their currency. In a more poignant example, Weimar Germany was economically ruined by its attempts to outrun debt by printing massive amounts of money. There are a few scenarios in which the Fed might have to print more money in the next year or two, but hopefully they won't come to pass.

2) It's not so much that they shouldn't increase demand, but that they can't increase demand. Supply-siders and neo-classicists believe that supply is the key to everything and that demand and consumption are just secondary consequences of having an adequate supply.

[terisan]

18. Thanks. I have learned something. nt

[terisan]

2. Agree 100%. They are trying to funnel money 90% to corporations, and 10% to government

The corporations will get direct money plus government contracts and there will be little accountability, governments will be able to meet their budgets but will still do a number of layoffs and will resist reducing property taxes even though they are based on over valuations.


I am thinking that the bailouts and this economic plan are set up to cushion corporate entities and the executive/lobbying class or tide them over through the downturn; and they hope the market and international trade will eventually right itself.

Rubin and Citibank tried to muscle the Treasury Secretary into helping Citibank make some money off Enron just before the Enron collapse. It was a small scandal at the time but was reported on in the NY Times as unethical on Rubin's part.

Larry Summers and Rubin had prevented there being oversight over derivitives.

It is weird that they are running the show now, but Obama did collect from Wall Street, more than any other candidate.

[JuniperLea]

4. Well done!

This is precisely why Main Street should be bailed out and NOT Wall Street. That will solve the demand issue. Once the credit cards are paid off or down, voila! There is the freed up credit! And there is the disposable cash back where it needs to be, in the hands of the consumers... who can then start buying things again, which will help manufacturers and retailers, saves jobs, etc.

Once more and again, our fucking stupid-assed government is doing everything ass-backward. But this time, I am quite sure they all understand how wrong they are going about this, and it is greed-driven.

On Edit:

And what the hell is going to happen to those of us, who through no fault of our own, know own homes with a larger mortgage than the house is worth? I went from having $150,000 in equity, to having -$50,000 in equity! And I didn't do a damn thing wrong! All I did was buy a home I could afford with a sound mortgage! Now I'm stuck, and my dreams of selling and buying another home are trashed. And all I did was be a responsible person... but no one is bailing out responsible people I guess. I'm so mad!

:mad:

[terisan]

7. So how do we stop them?????? nt

[JuniperLea]

8. I wish I knew...

Seems "We The People" have no power at all anymore.

[SoCalDem]

11. The only people I have seen so far, who "get it" are Elizabeth Warren

and Barbara Ehrenreich..Everyone else nibbles at the edge, but never tackles the problem head on

[SoCalDem]

10. the money ends up with the banks and corps no matter which way it's done

but bypassing mainstreet is a band-aid...not a tourniquet.

Not sure of the exact numbers, but if there's a trillion set to go to corps & banks because of failed loans, and they get "out from under" with that money, the people who OWE the money, still OWE it, so they stand to collect TWICE..

BUT..

if the money went to the "loanee"...in the form of redeemable certificates/coupons/whatever..to be USED to allay the debt, the same corps & banks would get them in the form of payment..and they would redeem them from the govt on the other end of the transaction..

They still get the money, but in the process, a whole lot of "buying power" is revived in the consumer sector..

Of course NEW regulations regarding FUTURE credit would have to go hand in glove, but houses would be revalued, and people would be freed from crushing debt they could never pay off, and the banks would still have the same money..

Even nature knows this.. there are some seeds that ONLY sprout after they have gone through the gut of a ruminant, and have "exited" that animal.. dropped straight from the plant, they do not sprout..

[JuniperLea]

12. How do we get this message out?

You have summed this up perfectly, and it lays waste to their lies so eloquently and completely!

[mmonk]

9. Yes. While help is needed in the financial sector, the typical top down

approach politicians now adhere or prefer to won't do it. First and foremost, preventing home foreclosures should be a top priority. The bottom has to be stablized and helped first which means the people.

[annabanana]

15. I've said this also.. NO ONE hires someone they don't need...

You only hire someone if you can't handle the work yourself, and your kid leaves home... or your brother moves west to try to break into show biz..

[Cleita]

16. Your headline will make a great poster for a protest.

It seems like the inauguration parade might be a good place to start. Obama said that the economy can't wait and neither can we.

[notesdev]

17. Should be obvious

yet so many clamor to pour yet more trillions into the money pit

'faith-based' economics

[Turbineguy]

19. But tax policy or other stimulus

can drive technology and therefore amount to social and economic engineering. The Bush gas-guzzler tax benefit comes to mind.

Consider that in Italy for years auto taxes were based on engine displacement. This stimulated Italian manufacturers to develop high performance low displacement engines. When it comes to hating to pay taxes, we could learn from the Italians.

In the case of making education an attractive alternative, workers take up educating themselves instead of competing for scarce jobs. Two benefits accrue at the same time.

This is the damage the Bush repubs did. They rewarded people for doing stupid and destructive things.

[annabanana]

20. I'm kicking this because it isn't said often enough.. and I have YET

to hear it, or anything like it, out there in the "real world". . .

[BR_Parkway]

21. You make a very valid point - but it really goes one step further

Who out there really needs more stuff? I know, that the poor don't have enough of pretty much anything - but what about the vastly bigger middle class? How many more TV's, pairs of shoes, latest fashion, etc.... do we really need?

Consumerism itself is the bubble bursting now - and it'll outswamp the real estate one by decades. So much of our economy has been propped up by people buying more and more stuff. And like all bubbles, it looks great to start with, everyone's making money and this party is going to last forever. But now that that cycle has broken, people are starting to look around and wonder what they were buying. A number of us have been looking and wondering about that for a number of years.

But if all the credit was restored, if Main St was solvent again - how many folks on that street are going to need to go for "shopping therapy" to find one more pair of shoes? And that makes up a huge part of Demand.

I wish more (esp in the government) were talking about how to fix our economy rather than just how to jumpstart it back to where it was again.

[SoCalDem]

22. What has to happen is that a major "down-scaling" has to occur

and credit reined in .. There are too many people who have not gotten real raises for AGES.. They got "E-Z Credit" for the rest of your life, couples with "low-low-prices" at Walmart..

There is a great reckoning coming, and I don;t know how we will adjust, but we MUST..

We cannot just keep buying "stuff", but the economy St Ronnie of Raygun and every president since, has "given" us, is 70% on us "servicing" each other, selling & marketing cheap stuff to each other, and then creating bigger houses to store all that :stuff"..

When we "had it all", we MADE stuff and sold it to OTHERS...