Recovery Bonds

First Wonks Anonymous wants to make it clear that he sees no short term problems with stimulus spending "stepping on" investment or other valuable activities. There are plenty of idle resources - factories, companies and people - and corresponding masses of idle dollars all waiting to be used.

Nevertheless he also thinks that there is a lot to be said for a carefully designed program to bring ordinary Americans in as full fledged financial partners in this recovery. Which will not happen if we fall back on the best thinking of our government and the finance guys. That thinking being to print money, use it to buy cheap goods from China and then borrow it back from the Chinese.

The fact is that US households are in terrible shape as experts such as Paul Krugman and Wonks Anonymous have pointed out. The only way that we can hope to get back on the path of sustained growth is to encourage private savings as a part of the recovery program.

Which brings us to the experience of WWII where the economy sustained prolonged full employment with high investment rates and which left American households in a position to prosper well after the war was over. See Krugman here for more.

How did we do it? Massive sales of small denomination US Government bonds. We can do it again. At this point most people would like to save, first by getting out of debt, then by laying something aside for the future.

Boomers in particular would welcome the opportunity to buy some kind of security that paid better than their current investments in stock, bonds and real estate. If we could find something that paid 3% real annual return over the next decade we might be able to look forward to eating Mighty Dog instead of Walmart generic dog food in our declining years.

The Government could create and market such bonds. The Fed could probably administer them using idle bank computers and bank employees. We could finance this recovery domestically and we would all be better off.

Besides, Wonks Anonymous has always wanted to see Annette Benning  and Meryl Streep selling government bonds.

 

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  • 7/29/2009 12:23 AM buntyp wrote:
    The Recovery Bond concept on the face of it, may sound like something that should be considered.

    However the current dilemma the Country
    is facing is far more complex than post World War II.

    The Govt. is not likely to convince anyone to make any such Investment.
    It is estimated that U.S. owned Capital outside of the U.S. is now approx. 16 Trillion Dollars.
    Not one dime of this is looking to repatriate anytime soon.

    This is not the sort of reality the Govt. want the people to focus on, because it would start a kind of post-modem of how come this happened, & why didn't people notice it while it was happening.

    The fundamental & underlying reasons which caused much of this Investable Capital to migrate, are still manifest today, as far as the really serious Investment people can tell.

    I think Prez. Obama is fully aware of this & sees the only optipion left, is to generally Downsize the the whole concept that the U.S. can survive at the 'Pinnacle of 1st. World Status'.

    I do not think that anyone in Govt. for example would wish to point out that GM in china is poised for some serious growth, without having anything whatsoever to do with GM-Detroit.

    What most folk don't yet fully understand, is that people like GM & Ford saw this whole situation in the U.S. coming from as far back as 30 years ago, & began shifting their focus away from the U.S.

    Their involvement in China & in Asia in general, has as deep roots as they ever had in the U.S.
    To check on all this today you only need type in any 'Browser' GM-China.

    There is no surplus 3 Trillion Dollars in the U.S. that could purcahase the Recovery Bonds which you suggest.
    In fact this is one of the main reasons for the Chinese mission at this time, to assess just how the U.S. is actually going to go about dealing with this absolute Financial mess.

    The Chinese are far from confident about anything they've seen, heard, or experienced so far.
    I would however caution you about using Paul Krugman as a reference for anything your'e proposing.
    He may be the Guru for the wanna-be Elitist set who orbit around the NYT, but he does not have any real Credibility elsewhere, except maybe for those Idealogues who wish to wallow in their Post-Mortems.

    I am not saying Krugman isn't smart, but how relevant is he really. Ask the Chinese.
    Reply to this
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