Economic Recovery: The Inverted economy

Economic Recovery:  The Inverted economy

Premise:  The money is still there.

    People have placed their money in:

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  Treasury Bonds
  


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  CD's at banks
  


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  Anywhere they can find safety
  

    Thus, the money withdrawn from the stock market that caused it to crash is still around.

Premise:  The economy is upside down and lopsided

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  Deflation in the home market
  


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  Deflation in electronics
  


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  Deflation in gas prices
  


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  Deflation in the cost of credit
  

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  Wealth concentration at the top
  


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  Greatest need for money to buy basic consumer goods is at the bottom
  


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  Upside down mortgages: People hold mortgages worth more money than the value of their homes.    
  

Premise:  Any economic stimulus to the middle class will be spent immediately

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  People who rely paycheck to paycheck will spend immediately
  


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  This leads to an upward spiral
  


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  5% sales tax, income tax off that money spent at businesses, payroll tax off employee wages, sales tax off employee purchases, business purchases, then income tax at another business - money runs around in circles
  

Premise:  Maslow's hierarchy of needs is not being met - thus consumer confidence is at all time low

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  People feel insecure about their homes
  


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  People feel uncertain about their jobs
  


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  People feel uncertain about what will happen with the price of things
  


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  People have fear that terrorists created, the news and Bush perpetuated
  


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  Fear prevents entrepreneurial investment and stock investment
  


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  This all prevents spending and investing that normally drive the economy, but the money is on the sidelines
  

Leadership over a steady period of time will begin to erode the problems.

1) People lose insecurity about their homes, the economy has a foot hold and progress can begin.

This means half way 2009 the economic graphs can be at a turning point, or 3/4 of the way through the year.

Is the US like an airplane that when in a flip will right itself?  But, if a pilot grabs the yoke it will get messed up and take longer to recover?  Is Barrack Obama the way the airplane has chosen to right itself.

Recovery by 6 months into 2010 if all goes well.

Issue concerning the value of a dollar.

Overseas: Our dollar buys less.  It is weak right now.

At Home: As home prices drop, the dollar buys more of the largest asset one can own.  

Weak dollar advances our exports.

If we re wrack our economy for massive exports through trade deals and alternative energy sales, then we have more money inflows into the economy.  

If home prices fall, then we can afford more home.  

So, we may be set to increase our countries revenue through exports and reduce the cost of things that are within our country.

This might cause American's to again feel rich, which would be a different way of having a strong economy and a weak dollar abroad, but a strong dollar at home.

Essentially, we cannot have a recovery that goes on course with how our economy operated before.  The track simply isn't there to move forwards on.  We must drive our train on the track that will at least give an option for consumer confidence returns.

When the foundation of our economy - our confidence in it - and our hierarchy of needs are slowly rebuilt, we will rebuild our country and our economy.

So, if we funded trade deficit with home equity, then trade profit is the way we rebuild home equity - fixing the largest drag on our economy.

So, the longer it takes to increase trade, the longer it takes for our economy to get on a roll again.