Sunday, February 15, 2009

Stimulus Package

The very controversial $787 Billion stimulus has passed and will be implemented as an attempt to give our economy a boost. The fact of the matter is that these simulus packages only act as booster shots that only temporarily ameliorate the situation. The fact is that our market is functioning normally, well kind of. Economies go through 6-7 year periods of fluctuating growth and decline, people become afraid when we see the decline phases because we see a weak economy, the truth is that for an economy to exist it cannot have uncontrolled growth or decline. Imagine if we had a runaway economy that continued for an extended period of time, we would have incredible inflation followed by an economy that cannot support itself! What is happening now is only part of the natural business cycle, the extreme effects of this decline however are caused by the compounded effect of a crippled housing market, a corrupt and crippled lending market and a severely weakened dollar. To add to this dilemma we had to suffer through high oil prices thanks to a war in the middle east and increased global demand due to growth in China and India. These factors served to create a rather disastrous situation where our economy simply decided to take a dive as the problems spread onto other markets, including the stock market and the money market. This stimulus package will serve to temporarily aid the overall economy for a short period of time merely acting as a booster so as to buy time for the cycle to turn on itself and start the growth process again. The package will definately help with infrastructure spending as businesses will take adavantage of the tax refunds and indivduals will spend more of their money. The fact remains however that our credit market is suffering greatly and that many people will simply recieve the money from the package and save it rather than spend it which is what the point of the package was in the first place. An economy in downturn will have its people suffer the least if consumer spending stays high. Unfortunately with the other factors in our current situation this is harder for many people but it must be done in order to correct the situation. So when you get your check think twice before putting it into your savings account and look at that shiny new plasma tv or xbox 360 you've been looking at.



  2. As the owner of a small business, I will not be seeing any effects of this stimulus package. I am still reading the new revised package to see if I will have any help whatsoever, but so far it looks bleak. I will be more than likely forced to close up shop as it were due to the lack of investment by other businesses. My clients, small business as well, do not appear to be getting any support either so I forsee no boost in spending. I do know that there are many worries of higher taxes on small business owners as a means to pay off this stimulus, and as a result many owners of small businesses have cut spending in just about any area they can. Since the first of the year, I have lost over %50 of my client base; mostly as a result of this thinking.

    As far as spending any stimulus money is concerned, if you spend or save it will have the same effect (so long as your version of saving isnt putting your check under your mattress). If you spend the money it will be circulated in the retail industry. If you save the money, it will go to your bank who can in turn invest it and make more "risky" decisions, like making to loans to average people that have always been able to get loans until now.

    Either way, I feel the money distributes too little to too many places and is quite a frivelous waste of time and more importantly funds.