Steps To Stimulate A Recovery And Employment The Law Of Opposites
December 19th, 2010 Filed under: MBA Finance Jobs — Finance Author
As I wrote in 2008 on the financial crash, I was in the small minority that would have let the market crash.
Now, you may be wondering what I meant then and mean now:
The market has been artificially propped up for years with over borrowing by the government, low interest rates and overspending.
No wonder individuals followed the same model.
I said then and I say now, Keynesian economics is misguided. It fosters mismanagement and irresponsibility as well as distorts the natural ups and downs of markets.
Things never go up forever. Bull markets don’t live forever, nor do people or animals.
The government should have let the too-big-to-fail institutions fail and broken them up. Same with AIG and the auto companies. The government should have incentivized private capital – equity money – to invest in these institutions at real values. They should have also incentivized capital to be invested in small businesses.
The result would have stabilized the market, brought values to realistic levels and had private capital invested in entrepreneurialism and growth.
The bottom line: The government needed to create deleveraging quickly by letting the market move toward its true value and bringing in equity at the same time. This would have taken out of the market the great uncertainty we now face.
Instead, the government has done the reverse to pay off its political debts and move toward its social view of the world by:
1. Increasing borrowing
2. Increasing deficits
3. Increasing taxing
4. Increasing regulations
5. Increasing health care costs
6. Increasing spending
7. Increasing its disdain for the law itself in changing the bankruptcy creditor laws
8. Increasing its demonizing of the rich and successful
9. Increasing its support of the untenable union positions – to get votes
10. Increasing its backing of Wall Street and big institutions over Main Street
11. Reducing certainty
12. Reducing standards – mouthing desire for excellence while appealing to mediocrity
13. Reducing incentives to invest – aiming at venture capital where investment is sorely needed
14. Reducing trust in government with ridiculous assertions that they increased employment by reducing the number of jobs that would have been lost.
15. Reducing the American’s confidence by constantly apologizing for America’s actions to gain favor with dictators and tyrants.
The government takes credit for any signs of recovery. Ironically, the government has contributed to the delay in the recovery. The recovery will come in spite of the government but at an enormous cost.
The banks still hold inflated assets – so many banks’ balance sheets are phony. The low interest rates are a subsidy for the banks, Wall Street and debtors against those saving and wanting to invest. This penalizes those that save and encourages speculation for greater yields.
Where does this leave us?
Continuing the same policies that got us here – a propped up, manipulated economy trying to serve those that will give the politicians votes and power rather than facing economic reality.
What to do:
Step 1: Vote those who back these politicians out – either party.
Step 2: Be entrepreneurial – that means you must understand that the rules have changed and you will have to build equity by not following the herd which is still stuck in a pre-crash mentality.
Step 3: Redefine what success means to you – ask yourself, have you lived, loved and mattered?
Gary Spirer holds a bachelor’s degree in Literature from New York University graduating magna cum laude, and an MBA in Finance from Columbia University.
Gary founded his own real estate company, Capital Hill Realty. In real estate Gary has developed, syndicated and invested in properties that in today’s value, aggregate over $500 million. Gary has raised over $60 million dollars from individuals and small funds.
For more on Stepsto, check out our website StepsTo at http://www.stepsto.com
For more on the financial crash, click here http://www.digitalrevolutionconference.com
