Save the World Plan B

Okay, let’s try this again. Apparently 700 Billion dollars is not enough? Big business wants us to trust them and start spending money, when they don’t even trust each other enough to lend money to each other? The media spouts off that we are heading for a certain recession, if not a depression, so people start hording and saving their money. Because people are hording their money and not spending it, big business takes another dive in the market. Then since the market keeps falling, the media spouts off that we are heading for a …. You get the picture? Does the term “vicious cycle” mean anything to you?

Somebody has to take the bull by the horns and take control to stop this downward spiral before the last straw is applied. Throwing money at the problem and standing back to see what happens does not seem to be the answer. The bottomless pit will never be filled. There needs to be a bottom applied.

I have heard it said the biggest fear for people who have lots of money is that someday they will lose it. So it is not surprising that throwing money at people who have a lot of money in a situation where they could stand to lose a substantial part of their security blanket, if not all of it, does not help issues any. I am talking about the big companies, their executives, stock holders and politicians. They are the ones who need to act to get our economies rolling again. Who wins if we are subjected to a long, drawn out “economic cleansing” that will affect everyone worldwide? Who sacrifices the most? The lower and middle classes do. The ones who are living paycheck to paycheck, two paychecks away from losing everything they own. Sure big business will take hits, but they will minimize their losses by cutting jobs, which again hits home in the lower and middle classes. In the short run and in the long run it will be an inconvenience to big business, but their lifestyle will not suffer nearly as much as what is now referred to as “Main Street”, yet it is Main Street who is expected to take the brunt of what has openly been admitted is Wall Street’s fault. Billions of dollars has offered to big business. They have accepted it with open arms, but did they move forward, freeing credit and putting confidence back into the air? Of course not, they are clinging to that money, fearful to take a step. Plan A is not working, so now we need Plan B.

Plan B

Either government, or the markets, world wide need to freeze the markets. No buying or selling until things are fixed. That way, those fearful of losing their money on paper can breathe easy for the time that they are not going to lose. This will also make them do something, so they can get back to making money again.

Put the 700 Billion in escrow, collecting interest, to insure bank’s loans to each other and unfreeze commercial credit. This will enable businesses to resume day to day operations and new businesses to get started. This will also enable people to keep their jobs, which will help cash flow in the economy.

Here is where the tricky part comes in. Big business and government need to take a long look at how much profits they are making. Inflation has outpaced earnings far too long and “the rich get richer and the poor get poorer” bubble has finally popped. Whether it is cut backs in top official’s earnings, lower dividends on stocks, having board meetings at corporate offices instead of tropical resorts, whatever it takes, the sacrifices have to be made at the top, without repercussions within the companies to the rank and file. Those savings needs to be passed on to the consumers in the form or lower prices and interest rates. This will install confidence on Main Street that “They” are serious about fixing the problem and the economy will pick up again. It also puts the sacrifices on those who were responsible for the problem in the first place.

Financial institutions need to address those facing foreclosure by offering new terms with lower FIXED interest rates. The government will recoup losses taken in the refinancing with funds from the 700 Billion dollar escrow account in exchange for a proportionate share in the bank until the monies have been repaid with interest. Making mortgages affordable for those who are hurting will not only keep those people in their homes, but those people will be continue to help adding to the economy going forward instead of being another drain on it.

If we go into a recession or depression the world will suffer for years to come. Plan B would circumvent virtually all of the suffering. The question is, “Are they willing to make the sacrifices they are asking us to make?”