Resurrecting the US Economy

Or fighting the snowball effect

By Dr. Edwin Weaver

www.uniqueleaders.org

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The US is facing one of the worst crisis in over a century, not an attack from hostile forces outside the country, but an implosion of the economy. The problem; too much, too fast and in the hands of too few.

To add to this problem Mr. Obama's advisors did not have a clue to what was happening or they were extremely optimistic. To give you an example; before Mr. Obama was elected he was going to create 1 million jobs, at the middle of December 2.5 to 3 million jobs, just before New Year's 3.5 million jobs and today 4.1 million jobs.

It would appear that our new president's advisors do not understand the economics of a depression or the consequences of it, even though they are economists. A recession or depression is like a snowball rolling downhill. It will continue to get bigger until something stops it. This snowball has gathered a lot of momentum. It would have been easier to stop 2 or 3 months ago, but no one was looking at the snowball at that time. Now, it is racing down on America and will do a lot of damage if it is not stopped within 12 weeks. I will present you with two scenarios - the good and the bad.

Scenario One - The Good

This scenario requires President Elect Obama to use all his charisma and leadership skills to push this through. It is similar to his current plan with only a few twists, but these twists are the parts that will stop the snowball.

With the remaining emergency funds, President Obama bails out the industries which employ the most Americans. Part the bailout for the industries carries the clause that no employees get laid-off. He also starts his reconstruction of the US infrastructure.

Not laying off employees is a two edged sword. First it keeps the morale of the US workers up and second if the people were laid-off they would be collecting unemployment benefits which the government has to pay out on top of the bailout. Therefore keeping the people working serves three purposes - morale stays up, less money out of the government, taxes still being paid into the government.

Of the 3 million unemployed American, Mr. Obama's plan to reconstruct the infrastructure of the US would put many of them back to work. This should help to bring more money back into the government via income taxes and hopefully create some new 'permanent' jobs.

I am not addressing the banks because they are falling due to people not having money to pay their mortgages. If the people are working again, they will be able to pay their bills and the banks will not be in dire straits. Therefore further bank bailouts would be unnecessary.

Yes, this is a very simplified outline. I have a written a 20 page analysis of the situation using this scenario, however no one would want to sit on the internet and read 20 pages.

Scenario Two - The Bad

Now we look at the flip side of the coin. If the lay-offs are not stopped, there will be over 6 million Americans unemployed by the end of March 2009. Remember the snowball, as companies lay-off workers there are less people to purchase goods and more companies will lay-off workers and it continues to grow.

This high unemployment will mean the continued bailout of the banking system and other entities. More people unemployed means more defaults on loans. More defaults on loans means more banks going under.

Next stop, the US defaults on its loans. Yes, our country can default on its loans. With the government paying out to create jobs (not at the same speed as jobs are being lost) and paying out to bailout banks and other entities and having a severely depleted income tax base, it needs to get loans from other countries. All the other countries are in a recession / depression and do not have money to lend. Therefore the US would be forced to not pay back loans it has already taken out, leading to a default on its loans.

This would destroy the confidence in the US and lead to further the world economic crisis beyond the proportions of the Great Depression. The world is too interconnected today. In 1930 the countries were still basically independent. Today the economies are so intertwined that this would cause a collapses of the entire world economic system, leading to chaos.

If you would like to read the entire analysis, you may request either the GOOD SCENARIO or the BAD SCENARIO or both. The good scenario is approximately 20 pages and the bad scenario is approximately 27 pages.