Friday, February 13, 2009

Recession, Depression, Stimulus - Again

The congress is set send the stimulus (so called) bill to the President today. It is reportedly in the amount of $790 Billion but some of the details I've read make me think it easily could go higher.

The government does not have this money sitting around somewhere. It has to be borrowed.

I know something about borrowing. I've been on both sides. Still am for that matter although I am more on the borrower side right now than I like.

From the lender side I was taught the 4 C's of Credit. Some say it should be 3 C's. Regardless the first C is always character. It just means that you have to be dealing with someone who is dedicated to repaying the money you are lending. If you lend to people who don't care whether they pay you back or not then your chances of getting your money back is not so good.

The second C is usually stated as capital. That means there has to be sufficient assets owned by the borrower to secure the loan in case everything turns bad and the borrower cannot repay the loan and you have to take the assets and sell them. So you want there to be considerably more assets than debt.

The third C is usually stated as capacity. It means that the borrower has all the necessary skills and personality and everything else to actually undertake and finish whatever thing she's borrowing the money.

The fourth C is conditions. It just means that even if the other C's are all in place that sometimes you just can't get your money back no matter what.

And that's the one that is the big problem at the moment. Because our conditions are that we are in a really serious and big economic recession.

So we have the stimulus plan. It is the government's attempt to lessen the impact of the recession.

In my view there are three large parts to the plan.

The first and smallest part attempts to help the people who are now or will be receiving government assistance. Mainly it is for unemployment assistance, social security recipients, and some medicaid recipients. This part totals about $193 billion. I think social security folks get $250 or something.

The second part and the next bigger is some tax relief for certain payers. But don't get too excited because it is about $400 for individuals and $800 for couples and not everyone in any event. There were some provisions for business. General Motors and a couple of others as I understand it get some more help.

The third part and the largest is spending for various projects. The total for all spending is a little over $300 billion.

I really see nothing in this bill that I think will actually help end the recession.

I guess they have to try and do something and the numbers are big and sound impressive.

At least there is nothing there that will help me get any projects going.

Just my 2 cents.

5 comments:

Lori1955 said...

I wish they would give us a better break down of this stimulus package. So far the only thing I like in it is improving roads and bridges and the like. That at least will create jobs.

I believe the whole key to fixing things is the banks. If we can get credit flowing again, then people can expand businesses and start new ones. This will lead to more employment, more consumer spending and more homes being sold. I don't fully understand the idea of a "bad bank" but it sounds like it might be the way to go.

I just keep thinking of that old saying of don't throw good money after bad. I don't have much faith in this stimulus package but it is going to pass, so let's just hope it works.

¸.•*´)ღ¸.•*´Chris said...

The last stimulus check I received went to rent. The only thing it stimulated was my landlords wallet.

rilera said...

I think we are on the edge of a depression. People keep talking about Japan in the 90s and how they didn't act quickly enough to avert a major recession thus their economy took most of the decade to recover. We'll just have to see. I truly think that their has to be more money for businesses but also for those individuals who are struggling because of layoffs or whatever. It's the right thing to do.

Cinnamin said...

Flinty! I found you through Chris's blog, and I am so glad to read you again!

Scary thing, this new stimulus bill. I agree with you, I don't really see this doing too much to help the current situation.

~Betsy said...

The Bill is available on the internet. My husband read through it yesterday - unlike the senators and congress folks who decide the yay or nay's. It isn't going to do anything but get the current administration re-elected. It's a joke and a disgrace.

I'm just sick over the whole thing.