The current state of affairs in the USA affirm the premise that good government is a prerequisite for a good economy. To truly prosper, industry and entrepreneurship require a peaceful, functioning society. While entrepreneurship propels economic growth, the environment for such growth must be provided by government. Economic growth raises the standard of living. Good government provides the quality of life in the form of public safety, a clean environment, and a well designed and well maintained infrastructure. Above all government is the referee that makes sure the game of economic activity is being played fairly on a level playing field without special advantages for large special interests at the expense of the total population. Without the rule of law maintaining a level playing field an economy will gradually sink into recession and poverty. Governments creating laws and regulations that benefit special interests and monopolies is the costliest form of corruption because it has a severe negative impact on the economy. We must undo the corrupt laws and prevent as much as possible any future corruption.
This "Recession Recovery Act" is a proposal for emergency legislation that will end the current Recession in record time (in under one year if executed exactly according to my guidelines and not a watered down version).
This proposal for emergency recession recovery legislation is a step beyond what Keynes recommended to FDR. John Maynard Keynes is the most brilliant economist up to this point in time. If his recommendations to FDR would have been followed to the letter and not watered down and interfered with by fiscal conservatives, the Great Depression would have ended by 1935/36 instead of 1941. If Keynes would have been an advisor to Hoover the small recession that started the Great Depression in 1929 would have been nipped in the bud in 1930 and would have never developed into the Great Depression.
So here we are with a recession that started small in 2007 and is a lot bigger now after years of fumbling and repeating all the same dumb mistakes that were made during the Great Depression and if we are patient enough our "too little too late" leaders will let us sink further toward a deeper recession and even Depression.
The Federal Government (under Bush and Obama) has made the identical policy blunders that were made during the first 3 years that led a mild recession into the Great Depression (Hoover and FDR).
There are many economic theories that claim to have the answer to the causes of recession. All these theories have not led to the discovery of a fast cure for recessions, nor yet the most certain method to stop and reverse recessions as soon as they develop. Most importantly these theories have not led to the discovery of economic measures that will prevent recessions to develop in the first place.
Here is the true and only cause of recessions
Increases and decreases in purchases of consumer goods and consumer services are the most important indicators for the health of an economy. All other economic indicators such as, employment statistics, inflation, taxes, money supply, interest rates, consumer debt etc. are influenced by or are influencing consumer purchases of consumer products and consumer services. The fact that all these economic indicators are so interdependent leads to the total confusion and poor understanding of economics.
A decline in consumer purchases causes an economic decline toward recession. Before the October 1929 stock market crash consumer purchases had already been in gradual decline since the middle of 1926. A decline in consumer purchases leads to a decline in the rate of inflation and sometimes even to deflation (negative inflation). A decline in the rate of inflation is a certain indicator that there is a net decline in consumer purchases and that the economy is drifting into recession.
Immediately after the 1929 stock market crash there was an additional sudden 10% drop in consumer purchases and that started off the economic decline into recession. The recession started out mild with unemployment at 4.5% and gradually rising each month to its highest rate of 25% in 1934. The current recession started in late 2006 with a decline in purchases of consumer goods and services. The decline continnued through 2007 and early 2008 the Bush Administration finally did a "too little too late" $168 billion tax rebate stimulus package. If instead of the $168 billion a much larger $500 billion would have been spent on the here proposed "Recession Recovery Act", the recession would have ended that same year 2008.
Instead the recession only got a temporary lift from the $168 billion tax rebate and resumed its downward spiral in October 2008 declined.
The results have been exactly the same and will continnue the same if Congress and the Administration do not adopt the very powerful "Recession Recovery Act" proposed below.
Economic stimulus measures proposed here clash with most currently held beliefs and theories of economics that try to understand what mistakes were made by the Federal Government that allowed a simple recession that started in late 1929 with 4.5% unemployment to run to 25% unemployment in 1934 and why it lasted more than 11 years until 1941 when finally the right economic conditions caused a rapid decline in unemployment to 10% in 1941 and then to its all time low of 1.2% in 1944.
This proposed "Recession Recovery Act" will stop the current economic fumbling that has allowed this deepening recession to continnue
Because this proposal clashes with most currently held beliefs and myths of economics, it will be opposed by the public and many in Congress. The powerful special interests that profit most from the currently held false beliefs and well established economic myths are expected to mount powerful opposition to this "Recession Recovery Act" legislation. Most so called "experts" in economics do not expect an end to the current recession any sooner than a few years from now. And these analysts are most likely right if the fumbling in Washinton DC is allowed to continnue in the same trial and error manner as it has since late 2006 when the first signs of recession started to appear. But recession was not noticed or recognized by the Government until early 2008.
What is needed to get Congress to understand and pass this emergency legislation?
First the public, the media and the Congress must learn the most important factors that cause an economy to succeed or fail. Then they must learn why the "Recession Recovery Act" will immediately create the economic conditions that will pull the economy out of recession in record time.
The true cause of the recession, any recession
The cause of the recession has up to this point not been correctly identified by the Federal Government and all the "expert" economists that advise the Government on matters of economics. If Obama continnues on his path of big speeches and small action, he will certainly damage the economy more. If however he will concentrate all his efforts on passing the legislation proposed herein, he will be remembered as one of the greatest presidents.
These are the 2 direct causes of recessions
The 2 direct causes of economic decline or recession and depressions are a drop in domestic manufacturing of consumer products and consumer services and a concurrent drop in the consumption of domestically produced consumer goods and consumer services. These two direct causes are closely related and many other factors add to these 2 direct causes.
These are the 2 direct remedies that end recessions
Two stimulus measures that at this point will require a massive $2 trillion in Federal funds need to be passed by Congress into law to get us out of recession in record time. Not passing this legislation will cost the American economy between $4 and $6 BILLION dollars per day for every day longer the recession is allowed to continnue.
Bush could have ended this Great Recession
This Great Recession could have been ended by Bush soon after it started in early 2007 at a cost of under $300 billion dollars. But Bush repeated the same mistake that Hoover made in his attempt to stop the Great Depression. Hoover created a $2 billion stimulus to help Cities, Counties and States (that is $40 billion in today's economy, a drop on a hot plate and too little too late). If Hoover would have provided a stimulus of $25 billion , or $500 billion in todays money, instead of $2 billion, he would have stopped the Great Depression from developing in the first place.
Bush did not end the recession with his 2008 $164 billion tax refund stimulus
Again it was too little too late. The $164 stimulus came 12 months too late and was at least $500 billion too small. If it would have been a stimulus to all Americans regardless of how rich or poor they are, the recession could have been ended with a stimulus of only $300 billion if done in the first quarter of 2007. After Obama took office in Jan 2009, he could have ended the recession with a considerably higher stimulus package of between $750 billion and $1 trillion. The longer you wait the more expensive it gets to get out of a recession. The cost to get out increases by about $2 to $3 billion per day to restore the economy to get all the businesses again going that were closed down or have been reduced to lower capacity. Since Bush did not end the recession, Obama could have ended this Great Recession in his first year in office and he can still do it now but at a much higher cost of 18 months talking big and doing nothing. It will cost now at least $1.5 trillion because the same FDR inaction is being repeated and both Democrat and Republican fiscal conservatives will oppose any deficit spending. So we are basically condemned to many more years of recession and even depression. The only way out would be such a tragic thing as WW2 that finally pulled America out of the Depression with massive deficit spending on wartime manufacturing. War with China anyone? No, of course not. The only solution: War on Congress and the White House with taking all members of Congress hostage and putting them in an economics bootcamp 12 hours per day for 14 days for them to learn how economics actually work. and beating out of them their flawed beliefs and economic myths that they know so well and preach wherever possible.
Obama should ignore his banker masters and go for a bold solution like this emergency legislation with the 2 excellent stimulus measures proposed here. No more blaming "the previous Administration" now. Get in gear Obama. Less talk, more action. But Obama has repeated the same mistake that Roosevelt made . Roosevelt tried the similar bandaid approash with his $5 billion stimulus measure creating the Works Progress Administration (WPA) which was a mere extension of the underfunded and failed Hoover $2 billion Reconstruction Finance Corporation (RFC). Had Roosevelt at that time given $50 billion ($1 trillion in 2010 money) to Cities, Counties and States instead of the WPA work creation program, the Depression would have ended in 1936. Roosevelt did again too little too late and in the wrong place. Republican Fiscal conservatives did hamper Roosevelt in doing more deficit spending. Obama did repeat Roosevelts mistake with the Bush/Obama $700 billion stimulus banking rescue plan. First of all banks are the wrong place where to stimulate an economy. Any stimulus should be done at the lowest step of an economic ladder. Money in consumers pockets to spend on consumer products and consumer services will travel up the economic ladder very quickly and reach the banks at the top of the ladder as well, providing help to the banks as well. The money that consumers spend on consumer products and services will quickly become additional deposits in banks and banks are regrettably allowed to magically multiply each dollar deposited by 10. Obama will be stopped by fiscal conservatists on both sides of the isle to get this here proposed emergency legislation passed.
So the $700 billion Emergency Economic Stabilization Act of October 3, 2008 was also passed on Bush's watch but with the full support and urging of Obama, so he should be partially credited with it, but then having all that money to spend for stimulus measures after he became president in January of 2009, only about $200 billion was released into the economy and it went directly to the wrong place, the banks. Since then Obama has only spent $3 billion stimulus money on Cash for Klunkers. That is proof positive that Obama is the same type of politician that makes big speaches and cannot bring himself to make the bold moves that are required to get an economy out of depression/recession. He makes the same timid stimulus mistakes as did Hoover, FDR and Bush. Then it does not help that any stimulus package is opposed by fiscal conservatives of both parties and a large segment of the general population and the well meaning people of the tea party movement. Even if the President were to want to talk less and do more, he would be unable to get big money stimulus measures through Congress. So the only solution at hand is that the media were to make it their duty to educate the population on the workings of economics and specially RECESSION ECONOMICS.
Federal Government at least $1.5 trillion in tax revenue shortfall per every year we remain in recession and the recession will deepen year or about $6 trillion in the next 4 years. The local governments (City, County, State) will suffer massive revenue shortfall as well and the Federal Government
How could it be possible that a simple manufacturer in California has the answers that evade all the "experts" in Washington and all the Nobel Prize winning economists?
The reality is that all the people in Washington and all those economists have made an incomprehensible muddle out of the science of economics so that nobody can understand how the economy really works.
I will first explain the two important measures that will get America out of this recession in record time and on the path toward a very prosperous economy. After that I will explain exactly how and why these 2 measures are without flaws of thinking and can be implemented starting tomorrow. No time to lose, but don't hold your breath that Washington will do anything soon. Talking yes, but doing no.
1. The Federal Government must distribute National Debit cards to each of the 300 million people that hold a Social Security number. THat includes babies and small children and documented aliens. These National Debit cards must be funded by the treasury immediately with $200 each in the first month of this new consumer stimulus program. The requirement is that the $200 MUST BE SPENT WITHIN 30 DAYS. Whatever has not been spent will revert back to the Treasury. That will amount to a $60 billion dollar consumer spending stimulous the first month. Any money that is spent to buy WANTED consumer products and WANTED consumer services can create some inflation. Putting $60 billion into the economy during 30 days will create inflation at a rate not known untill after the 30 days. An inflation rate that is deemed tolerable is established BEFORE the first month $200 funding, say 15% annualixed. After the percentage of inflation is known after the first 25 days of the first $200 30 day funding period, the next month National Debit Card Funding can be kept the same $200 if inflation was between 10% and 15%, it can be increased to $250 if inflation was under 10% and it can be decreased to $150 if inflation was over 15%. This will regulate the consumer spending so that the rate of inflation does not run out of control. This National Debit Card consumer stimulous alone will already turn the tide on the recession. It must be made clear from the outset that this National Debit Card will be a permanent fixture as a tool that can be used immediately whenever the economy has the slightest downturn as a result of lacking consumer spending. That will encourage manufacturers and retailers to have more confidence to return production and distribution to the level it was before the recession. It also will be a tool with which all future downturns in the economy can be immediately reacted to with a consumer stimulous and that will prevent any future recession from going very far. The government also needs a good "tool" with which to take money out of the economy to help temper inflation when it runs out of a predetermined tolerable range. That tool is taxation which modern government has always had, exceot the taxation systems that governments have are disgustingly complicated and subject to massive government corruption and a destabilizing influence on the economy. The current USA tax system is 65,000 pages of rules and regulations and it is so complicated that it absobs 12% of the American wage earners to administer it and to comply with it. New and simpler tax systems would be advisable. It is another subject of interest that I have dealt with on another website http://www.automatictax.com/ but let us not digress from ending the recession and move on to the 2nd vitally important part of the recession remedy that follows.
2, All local governments at all levels of jurisdiction (State, County, City) must be immediately funded by the Federal Government to where all their budget deficits are covered. All local governments have run out of money and have laid off lots of people and that has seriously contributed to the unemployment percentage and the recession. When local governments run out of money they will typically stop funding all the work that is done by subcontractors such as filling potholes, repairing bridges, repaving streets, landsscaping, maintain infrastructure. Next they will close libraries and other public facilities and cut staff at schools and other public services. Empty out jails and cut capacity, cut fire and police services and basically lower the level of service at all government offices overloading the government people that are not laid off. So funding all the local governments with all the money they need to get back up on steam will rapidly increase employment again and help reverse the resession. Then ever more funds will be given to all local governments so that they can start up all the new infrastructure projects that have been sitting on their desks for many years because of lack of funds. This funding for the ready to go local infrstructure projects must be very carefully handled so that the local economies do not create too great of a demand on the job market and slowly fund these projects until unemployment is under 4% and then stop that extra funding for new local infrastructure projects. At around 4% unemployment there is a healthy percentage of employment that will not encourage unions to create inflation by driving up wages.
But now for the trillion dollar question
Where will all the money come from with which the Federal Government must fund these two consumer stimulus packages, the National Debit Cards and the funding of all local governments?
You cannot print money right?
We all know that we cannot print the money because the bankers have taught us all that printing money creates hyper inflation and makes a bad economy even worse and may make it collapse from which it will not recover for many years. The bankers also have given us plenty of examples of countries that have printed money and then ended up with hyper inflation and an economy that had completely collapsed. Nearly everyone has heard of the German economy in the early 1920s where it took a wheelbarrow full of money to buy a loaf of bread. And then there were Argentina and Brazil and dozens of other examples of money printing countries where the economy totally collapsed. The bankers have taught us well and they also have succeed in persuading many colleges and universities to teach the same inaccuracies to get future generations to fully cooperate with the massive organized holdup robbery by the Federal Reserve and its tight knit club of co-conspirating banks that have caused the various governments to pass legislation and regulation that fully and legally support this largest sheme of corruption by this criminal banking cartel.
The bankers lied and are committing grand theft and organized robbery on our economy to the tune of billions (maybe ever trillions) per year
The banker taught us that printing money causes hyper inflation and creates a bad economy. But the cause and effect of this money printing story are completely reverse in that the countries that started printing money had a bad economy already such as the United States has right now after which they started printing money, sort of what the United States is doing in a roundabout way right now by allowing banks to create new money out of thin air that the banks then lend to the Federal Treasury.
The true story is that printing of money does not create a bad economy. It is the other way around. A bad economy creates a dramatic drop in government tax revenue at all levels of government. The government runs very large budget deficits and now must do one of two things: borrow money from bankers or print money. THe banks of course like it much better that all the governments at all levels including the Federal Government will borrow money from them and make guaranteed interest on that money for seemingly ever because governments rarely reduce their debt by paying money back to the banks, The National debt is rising relentlessly and will never be paid down or off by us or any generation that follows us. It is a permanently increasing interest burden on all of us to the benefit of the banking cartel. That is the reason why the bankers hate the printing of money so much and teach all of us falsehoods about it,
In the past there were no banks big enough to lend money in the vast amounts that governments needed, so the governments were FORCED to use the alternative solution, the printing of the money whenever the economy would tank and tax revenue plummeted as a result of the bad economy. So the bankers lied. It was not the printing of the money that created a bad economy. It was exactly the reverse in that the bad economy forced the government into having to print money to get the money with which to pay all the government expenses. But those governments in the past were mainly interested in being able to have enough money to pay all their own bills. There was little thought given to how exactly to stimulate the economy back into prosperity. It was more a waiting game to see how long it would take for the econimy to recover. Governments are famous for inaction in periods of crisis and standing motionless like deer in the headlights. So not much was done, just like now in the United States and elsewhere, to bring the economy back to prosperity. But today there is some knowledge about the possibility of government being able to help the economy to get back on its feet again. But that knowledge is limited to the total combined brain power in Washington which is unfortunately very limited. What you read here on this website is very simple and easy to understand so it should be able to be implemented by the average 100 IQ brain power. But don't hold your breath because governments will first hold six months of hearings and commision several months of studies before they do anything.
The bankers, having made their case successfully against the printing of money, now sold our governments on the idea that printed money to stimulate the economy is very bad and creates inflation and maybe hyper inflation, but money borrowed from the banks to stimulate the economy is great and nothing wrong with it. WE THE PEOPLE have not discovered the joke the bankers are playing on us in which they apparently are saying that stimulating the consumer economy with printed money will cause this dreaded inflation but stimulating the economy with borrowed mony that we pay the banks interest on, magically deos not create such inflation. SURPRISE borrowed money creates the identical inflation as printed money does. Wow, what a revelation, but a disater for banks if the general public comes to understand that printed money is actually far superior to borrowed money from the banks, because borrowed money creates a debt that has to be paid back and it also requires interest payments to the banks. Of course the banks make certain that the debt never ever will be paid off because that would eliminate those never ending interest payments to the bankers.
So lets print the money and slowly pay off all debt at all levels of government
So we can indeed print money without any ill effects and that money printed by our Federal Government is money that belongs to "We the People" we print it and it is ours. No need to borrow money and create a National Debt that will never be paid off and our great grandchildren will have to pay interest on it to the great grandchildren of the bankers. So the printed money can be used to fund the National Debit cards and pay all the local governments as much money as they can absorb without creating too much inflation. and then we can also stimulate manufacturing back to the level where it was when America was the manufacturer for the whole World. Also with printed money, but carefully so that it will not create hyperinflation. The reason why printed money in the past created hyperinflation is that little or none was used to stimulate manufacturing, distribution and consumption.
Basics of economics
So the basics of economics are that whenever you feed WANTED consumer goods and WANTED consumer services into the economy, you create DEFLATION ( money increases in value) and when consumers buy those WANTED products and WANTED services they create inflation (money decreases in value). The trick is for Government to carefully monitor production and consumption and give stimulus where and when needed to create a smooth running economy of ever increasing standard of living and that includes environmental concerns as well for which there will always be money available in this new understanding of economics. The money available to governments at all levels of jurisdiction is mainlt tax money and then the occasional printed money when needed such as pulling the current economy out of recession by stimulating consumer spending for WANTED products and WANTED services. I keep mentioning these WANTED goods and WANTED services. What signifficance is there with this word WANTED as distinct from apparently UNWANTED?
The big fear and caution in this money printing business is that politicians are hard to control and will start printing money like crazy and will steal half of it of course and give much of it to the bankers that currently own
The exact details will be explained in my ECONOMY OPERATING MANUAL