Today the Wall Street Journal (article linked here:http://online.wsj.com/article/SB10001424052748703748904575411553343672456.html?mod=ITP_opinion_2, or click on heading above)commented on yesterdays rumors of another "stimulus" that might come in August.
This trial balloon could presage something good, something that might stave off the disaster that a monetization of the deficit would create.
Christine Romer follows Peter Orzag out of the current Administration, removing the intellectual barriors to further "stimulus" (Romer has written an embarrassing analysis with her husband, that casts serious doubt in the multiplyer effect of stimulus).
These excertps illustrate the scepticism that greets such an effort:
" The argument behind the "free stimulus" is that Fannie, Freddie and the Federal Housing Administration own or back about 37 million loans, and so the government "already owns the risk." If the mortgage agencies effectively forgive some of that debt, voila, the indebted homeowners have more cash to spend.
Skeptical mortgage analysts were quick to point out that the government's two existing programs for struggling homeowners—HAMP for loan modifications and HARP for refinancings—have poor acceptance records. Their failure suggests that even a huge new forgiveness program is unlikely to work as hoped. An analysis this week by Credit Suisse, which calls the idea "too difficult to do properly," estimates the "stimulus" would be more like $10 billion to $15 billion."
I do not propose a "Free Stimulus" ..again the journalistic uninitiated have mis-diagnosed the problem.
I propose a disciplined, simple method of relieving the mortgage crisis which is at the heart of our financial malaise.
No debt is "forgiven", it is attached to a tangible asset and is recovered over time by the lender with the most ability and patience to wait for that recovery - the Federal Government.
"Stimulus" spending using money created out of thin air is a doomed exercise for all.
Creating the conditions for the population to assume sane levels of debt and spend their surplus income WILL create the conditions for economic growth.
The only way out of our impending economic disaster is to create these conditions and unleash the great creative, economic might currently curled up in fear in the bosom of all citizens.
The time is now, soon it will be too late.