My Last Name Means Money

As the House of Representatives plans to vote on a revised bank bailout today, I’m excited to bring you this blog’s first State of the Economy address. Unlike John McCain, I do not believe the fundamentals of our economy are strong. Rather, there are several deep issues at the very core of the United States economic system that must be addressed before we can move forward. A bank bailout is not chief among them, rather our energy dependence, education system, and credit based consumerism are issues we must analyze and draft a new course on, otherwise we will sink.

Though I recognize there are many areas we must quickly improve in order to maintain our nation’s global economic leadership position, there is no need and certainly no time to panic. Let me repeat, the mantra of The Hitchhiker’s Guide to the Galaxy:

Don’t Panic.

The sky is not falling, our economy is not crashing (with or without the bailout). Simply put, the situation is not as serious as our lawmakers make it out to be. Heck, The Federal Reserve already bypassed Congress and simply printed an additional $630 billion and handed it over to the banks. Yet, there is no amount of money that will plug the holes of the befuddled banks. These banks should not be propped up and pardoned for their poor business practices. The banks are failing and should fail. Rewarding banks and mortgage holders for taking unrealistic risks simply punishes hard working Americans who paid their mortgages and lived within their means, saving money instead of spending it.

As the federal government spends more and more money, the value of every dollar earned and saved by Americans loses some of its worth. The U.S. dollar will continue to lose value as the U.S. government becomes more and more bloated, without contributing anything back to infrastructure and development. A bailout for socialized health care, green energy, or free college education would truly help our economy by freeing up small businesses to innovate, rather than worrying about spiraling health care costs for its employees, reducing our energy costs while improving our environment and a free college education is literally a no brainer.

Instead we will likely choose to provide rich bankers who cheated, lied and clawed their way to the top with no regard for our society a nice big bailout bonus, paid for by you and me. Do not let Barack Obama or John McCain or George W. Bush convince you otherwise, the bank bailout is completely unnecessary, will damage the economy and is borderline criminal.

My faith in American entrepreneurs and workers leads me to believe the economy will bounce back either way, though a bailout will prolong the core issues instead of addressing them. In either case, the support of this bailout by the establishment has sealed my vote for 3rd party candidates across the board. As a small business owner I cannot support a bill that will vastly devalue the U.S. dollar and encourage poor business practices.

Bailouts beget bailouts

Photo credit to Tracy O.

Since the first bailout this year of Bear Stearns in March, more and more banks have stepped forward looking for bailouts. Think about that fact for a minute. The bailout of Bear Stearns was done to prevent market panic, and yet here we are months later having set the record for the largest one day point drop in the Dow ever. Since the failure of Bear Stearns, more and more banks have failed and requested bailouts. This fact leads us to only one conclusion, bailouts beget bailouts.

Simply put, we’ve changed the rules of our entire economy. No longer do companies need to earn a profit. No! The new way to make money is to just ask for it from the government! No matter how politicians spin it, a bank bailout encourages banks to fail! Why compete when you can just beg and plead your way to hundreds of billions of taxpayer dollars?

OK, let’s move on and assume this bloated bill will pass the House today. I hope it does not, but my faith in these politicians is on shaky grounds, especially after they explained their real reasons for voting nay on the bill the first time around was for mostly fickle reasons. Basically, many of the Republicans simply did not like Speaker Pelosi’s tone so they decided to vote nay.

Wow.

And to think I actually believed they listened to the cadre of their constituents who called in to express their disapproval of the bank bailout bill. Now you understand why it seems near inevitable this bill will pass. The majority of our politicians are simply too incompetent to stand up for their citizens.

Let me stop here and give massive credit where it is due. My Representative, Stephen F. Lynch (a Massachusetts Democrat), not only voted nay on the original bailout bill but will also vote nay on the Senate’s bailout bill. Mr. Lynch has gained an immense amount of respect in my book, though knowing his blue collar background it does not surprise me that Representative Lynch would stand up for regular Americans. We desperately need more Democrats and Republicans with the confidence and courage to stand up for us against the tidal wave of lobbyists and corrupt officials holding our economy ransom. If you have not done so yet, please call your Representative and let your disapproval of this bill be known. Personally, I’ve called Stephen Lynch’s office to thank him for doing the right thing and voting against the bank bailout.

Let me iterate, Mr. Money does not support a bank bailout. However, if we are to assume that a bailout will occur no matter what, there is one way to bailout banks, while also helping mortgage holders and home owners and minimizing damage to the economy. Once again, Mr. Money knows the best bailout is no bailout. However, if we must do a bailout here’s a better way.

Trickle Up Economics

Photo credit to photo808

Think about how rich people get rich. They do not do so by spending, rather they save every cent they can and claw their way to the top. We are supposed to believe that now that they are at the top they will take free money and spread it downwards through the rest of the economy? We are basically supposed to believe that these rich people will now spend, spend, spend, even though that is the exact opposite of what they’ve been doing their whole lives?

Give me a break.

Now think about poor people. They not only spend every dollar they have, they must because rarely do they have anything left over after paying for the most basic of necessities. Not only do they spend everything because they have so little, even when they do get a few extra dollars they usually spend it near immediately on a luxury good so that just for a short instance, they too can feel well off.

This huge distinction between the social and economic behaviors of rich and poor people must be recognized and acknowledged by you, dear reader, before we can move on to the solution to America’s banking and mortgage crisis. The solution is simple, logical, compassionate and fast.

It is with immense pride that I introduce trickle up economics, the saviour of our economy from the death grips of reagonomics. All of a sudden, every bank across the world is crying out for help. They scream and shout that they simply have no money, as they are immensely burdened by shady mortgages that no one can afford to pay. Meanwhile, average citizens across the country are being thrown out on the street as banks announce foreclosure after foreclosure.

Well, with trickle up economics everyone keeps their homes, banks receive cash for illiquid assets, home owners get a little bit of spending cash AND the value of the dollar might actually increase, though at the very least it would not plummet.

The crux of trickle up economics is the creation of a new currency, let’s call it Home Bucks. This new currency will not have the full power of a U.S. dollar, rather Home Bucks can only be used to either pay a mortgage or improve a home. You can’t use Home Bucks for food, clothing, or to pay off credit card bills or any other number of non-home related purchases.

You can however use Home Bucks to pay your mortgage, buy solar panels, wind mills, or other energy efficient home improvements. You cannot use Home Bucks to buy a new TV, furniture, or renovate your home for purely aesthetic reasons. If a renovation is to improve the energy efficiency of your home, then Home Bucks can be used.

To make sure we get the most bang for our Home Buck, all new and existing mortgage interest rates for homes under $1,000,000 will be capped at 5% for three years. This cap will allow mortgage holders a fair chance to pay off their debts without going completely broke in the process.

As people pay their mortgages off with a combination of Home Bucks and U.S. dollars, banks get cash for their previously worthless mortgage paper. At this point, banks can turn in their Home Bucks to the U.S. government for an equal 1 to 1 exchange for U.S. dollars. There is one small catch though, all transactions turning Home Bucks into U.S. dollars are taxed at 50%, on the spot. Once the government has Home Bucks, they are removed from circulation and deleted from existence until all Home Bucks are gone and invalid.

I’ll admit, it’s not a perfect plan. The perfect plan is literally to sit back and do nothing and allow bad business to fail. However, it seems our government is hell-bent on jamming some sort of bailout through the congressional pipeline. At least with trickle up economics, average Americans keep and improve their homes, banks gain liquidity, and the government gets their money back, plus a hefty tax on top. I’ll remain optimistic and hopeful that the House of Representatives will once again defeat the bank bailout bill and stand up for the American people. Though, I’ll restrain my optimism with a realistic understanding that many politicians are simply too incompetent or corrupt to understand the ramifications of this massive bailout bill, I’ll still hold out hope that we the people will win this fight.