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Another Market Worry: What Happens When Stimulus Ends?
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Another Market Worry: What Happens When Stimulus Ends?

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Another Market Worry: What Happens When Stimulus Ends?

As if Friday's jobs report wasn't bad enough, there's another worry for the markets: With over half the stimulus money chewed up, how does the economy survive?

More on CNBC...

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I think there has been a major miscalculation by the administration with the economic "stimulus".
A little background: I see two schools of thought on money, wealth, the universe and everything. There are those who see wealth as somewhat finite. Like energy and matter, it can neither be created or destroyed, only transferred. If you have something, it must have come from somewhere or from someone else. The second school of thought believes in the creation and destruction of wealth. You can create wealth without taking it from someone else. Possibly even to the benefit of both.
I believe this current administration subscribes to the first school of thought. if wealth is finite and cannot be created, then it cannot be destroyed either and there can be no consequence of distributing it as one sees fit.
I believe that is why they have chosen the path they have for the disbursement of stimulus finds. The overwhelming majority of which have gone to destinations that cannot and will not create wealth. Government projects, governments jobs, public projects. While all these will have an immediate stimulus to the economy as a whole, once the initial project and outlay of funds is gone... they're gone forever. none of these projects will generate income for the government or for the American people, or for anyone for that matter. Some will in fact create or boost a drain on the American people through the monetary needs to maintain them. i.e public sector jobs require a source of funds to pay those salaries. I know of very few government jobs that are income producing and therefore they must pull dollars from the economy. Infrastructure requires maintenance and utility upkeep... again drawing dollars from the economy.
Had the stimulus funds been spent on projects that would generate income and create wealth after the initial outlay of money, I think we would see a jump-start of the economy. As such though, I believe the "recovery"is merely an illusion created by inflationary spending that will expire with the dollars leaving only debt behind.

Being hell-bent on printing a trillion dollars, had the government simply used it to fund it's own expenses and given a total tax holiday for the duration, we would have seen massive growth in our economy. And it would have been growth in areas that would have been perpetual even after the tax holiday expired. As such, with the uncertainty of the future tax situation compounded by the impending consequences of increasing debt, America is wholly unwilling to spend any more money than is absolutely necessary. And THAT is why the economy will not recover any time soon.


I can give a practical example: I had $3,000 set aside earlier this year as a down payment on a new tractor. instead, the fine state of Missouri felt that someone less fortunate than me deserved my money more than I did. I saw a $2000 increase in my taxes... and that's AFTER I dissolved my small business. (There's going to be a perpetual loss of wealth due to this factor alone. i refuse to work harder for someone else's benefit). I now am not buying a tractor. The state has lost the $1,400 in sales tax I would have paid. the state has lost the $400 in income tax the sale would have caused the Dealer to pay. The state has lost the taxes I would have been paying on diesel for that tractor. Even worse, the factory worker in Kansas will not be working as much, because a tractor was NOT sold. The truck driver will not be transporting a new tractor to replace the one I would have bought off the lot.... and the snowball keeps rolling. I can see almost immediately that there has already been a net loss to the economy in the first year. There will also be a small net loss in all the years following as I won't be buying fuel or parts for the tractor that I do not own. This is why the government's revenue goes down when it raises taxes and why it goes up when it lowers taxes. . Multiply my example by millions of Americans who are in similar situations and THAT is why the economy will not recover any time soon.

Sorry... got a little off track. but I'm not bitter.

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I've said this before but perhaps this is a good place to repeat it, and I welcome your input.

I will keep it simple. Why not spend a trillion dollars on making the US the largest producer and exporter of Solar panels? This seems to be a good fit. a) Create jobs, b) Export, c) High tech.

The problem with solar panels today is there aren't enough of them, they are hard to produce. I bet a couple hundred billion dollars might make that a bit easier. Who cares if we even sell them at a loss for a while. At least it puts millions of people to work in high-tech jobs, and at least we are manufacturing and exporting something again.

People need jobs. Government is printing money. Why not do something like this?

Mike

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Big Mike View Post
I've said this before but perhaps this is a good place to repeat it, and I welcome your input.

I will keep it simple. Why not spend a trillion dollars on making the US the largest producer and exporter of Solar panels? This seems to be a good fit. a) Create jobs, b) Export, c) High tech.

The problem with solar panels today is there aren't enough of them, they are hard to produce. I bet a couple hundred billion dollars might make that a bit easier. Who cares if we even sell them at a loss for a while. At least it puts millions of people to work in high-tech jobs, and at least we are manufacturing and exporting something again.

People need jobs. Government is printing money. Why not do something like this?

Mike


I think that would be a good example of spending on something that creates wealth. Probably the best kind too - Energy! For decades to come. I'm fairly libertarian in my views, but if the government insists on spending that kind of money, it would be well invested if in energy independence.

Now you got me crunching numbers: You could put full solar systems on every home in America for 2.5 trillion $$$. (Array, controls & battery storage). Even less if there were a nation grid-tie program. Better yet we could build sufficient wind farms to power the entire country for even less. The Texas panhandle can produce 1.5X the electrical demand of the entire country. North Dakota has more than enough wind to meet the electrical demand of the entire continent. But I've been unable to find any information on what the installation/maintenance costs would be. Wikipedia has an excellent article on the subject.
You could provide huge tax incentives for small home or community solar & wind arrays. Makes me wonder if the government is really as serious about energy independence as they give lip service to.

Geez. Think of the what the economy would do if every house in America had an extra $100-500 per month they were saving off their energy bill. My gosh, Tax revenue would skyrocket due to the extra consumer spending.

You should read "The first billion is the hardest" by T Boone Pickens. He has very progressive ideas for energy independence. And an outstanding trader too!

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