Late last year a prominent economist, who's name I can't seem to recall, made a bold prediction - by this summer of 2011 the housing crisis would be history, employment would be growing robustly and all would be well. He based this rosy scenario on two basic ideas: 1) housing had bottomed out and the country's private companies would be growing and hiring. Whoops, missed 'er by just that much. Now I'm not going to sit here and disparage this highly educated and occasionally correct economist, as I'm sure his crystal ball was not working well that day. But I am going to offer up, as promised, the following observations along with two ideas for getting this country's economic train wreck cleared off the tracks so we can start rolling again.
Let's face it, the housing market still sucks and will likely continue this way for at least another 12-18 months. Interest rates remain low and the FHA is backing practically any mortgage thrown its way, so why the continuing doldrums? Mainly it's a lack of jobs of course, as well as the always tenuous deflation scenario where everyone keeps waiting to buy "at the bottom". However, without buyers, there is no bottom. Like many economic cycles, we just keep circling the drain. So how do we break this cycle? I believe the first step is to get the myriad of companies in this country that are reporting OK balance sheets and net income gains every quarter, including our beloved banks, to start spending and hiring again. Without question, one of the main reasons the stock market has been gangbusters for several years and is currently not far from historic highs is that companies are profitable and they have a ton of dough laying around. In fact, according to Reuters, US companies are holding a combined 1 trillion in cash. Or should I say hoarding the cash. This amount is much more than Obama's stimulus package, which finished up somewhere around 700 billion. WTF?
I'll tell you WTF. The economic world remains way too uncertain, and uncertainty is the killer of private investment, and private investment creates jobs. Sorry you dumb-ass Republicans, but rich CEO's don't create jobs, they just siphon off obscene amounts of money that could go towards hiring workers. Don't need a PHD in Economics to figure that out. CEO's do make decisions about how company profits are divided up, but large companies haven't been the main source of job creation for some time. It's medium and small businesses, start-ups and the like, capitalized by hedge funds and individual investors who are more sensitive to the potential for loss than some CEO who knows he'll collect millions even if he's a complete buffoon and drives his company over a cliff. It's in his contract bro.
So we need stability and certainty, and this starts at the top. Mr. Obama, no more financial rules-changing bills for now. Give in to the House morons, raise the debt ceiling and put off the big decisions about reducing the deficit until later. I can't believe I'm saying that but certainty must be restored to the economy now so all that stored money can start flowing. Also, allow interest rates to creep up a bit. Yeah the stock market will get runny shit for a spell, but a sense of doing something today, before it gets more expensive, is desperately needed. We need some goddamn inflation Bernanke, and it's time to end the free ride for the banks. If they're still needing to be propped up, fuck 'em as they're too far gone. This morass of waiting for zombie banks to get healthy is what killed the Japanese economy for 2 decades. Every dollar entering the economy is borrowed in from the Fed, so if the bank is a credit risk, let them fail. End it now!! We must move on!
In addition of certainty, we need to crack the endless cycle of unemployment, and to do this we need a jobs idea that actually fucking works. So, as I have done before, I turn to Germany, the leader of the Eurozone and the land of many smart motherfuckers. Germany's economy is growing at 3.5% and unemployment is below 6%. Not stupendous but a whole better than the U.S. So how did the Deutschlanders pull this off? An idea called Hartz IV Labor Reforms has helped a bunch. When introduced, rioting broke out as the main reform was cutting unemployment benefits. But there was a method to this madness - a work sharing arrangement between the federal government and private industry where companies were encouraged to cut hours rather than workers. Then lost wages from working less were made up by a type of unemployment benefit from government, up to 67% of lost income. People kept their jobs while companies enjoyed a more flexible and trained workforce. Laying people off and then hiring new ones is inefficient and expensive. This reform also prodded the chronically unemployed to take a job, any job, in order to continue receiving benefits. This reform helped fix many problems with unemployment. Workers kept their skills honed and union contracts remained intact, helping to eliminate the open warfare on unions that is occurring in this country. Germany has enjoyed a continuing decrease in unemployment despite the fact that they experienced a deeper recession (according to the numbers) that the U.S. Brilliant!!
It's like the residential solar panel requirement the German government has in place that I've reported on before. It's smart, efficient and one other thing - oh yeah, it works!! When-o-when will the leaders of this country grow a brain? Why doesn't Obama call a fire-side chat and explain to this ignorant population ideas like this, ideas that are proven to work? Use some Ross Perot graphs and shit, act enthusiastic about it, build a consensus and then DO IT. Communicate intelligence. It might catch on by spring so we can start growing our way out of this fucking mess!
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