Go For It!!

Let me start by apologizing for the radio silence this weekend. Busy with stuff Saturday and did my first skiing in two years today. So while I wait for the ambulance to arrive so they can carry me to work tomorrow - these old muscles aren't what they used to be - I thought I might as well try to slip in a post. I will seek to add more after the family goes to bed and the pain dissipates.

So the "Go for it!" header refers to Yellen a yellin' about big time fiscal stimulus, as in the not seen in our life times kind of stimulus, as in pull-out-all-the-stops stimulus, as in act-now-think-later stimulus.

Don't get me wrong, I a big fan of stimulus, but one has to define what we are choosing to stimulate. Yellen seems to want to stimulate lending and spending. Let me check my blog archive a moment, and, yep, just as I thought, lending and spending is what got us into this mess. Call me silly but more of the same seems like a hair-of-the-dog cure. Feels good for a while.

Here are some things worth stimulating, in my opinion:

• Let' stimulate people to pay down their debts so they are not drowning in the stuff. It was not planned that way, but the stimulus package in 2008 mostly went to paying down debt and building savings. The right places in my view but not what the government wanted.
• Let's stimulate house prices getting to a rationale level with as little pain to (former) homeowners as appropriate. We need affordable housing for people but that does not mean they have to own the home. I have rented most of my adult life and it worked out just fine. Make sure those losing their homes have an affordable place to rent and put a roof over their heads and let home prices find their own bottom.
• Let's stimulate small, medium and large businesses, who simply need credit lines to do regular operations, such as for lines-of-credit for international trade, to actually be able to obtain the credit they need to operate. Those who do not deserve credit, so be it, but credit is the lubricant needed for many daily business functions by well run businesses of all sizes. The government should lend the money directly to worthy companies and skip the financial institutions. Giving the financial Goliaths money is like tearing it up and flushing it down the toilet.
• Let's stimulate lenders using appropriate underwriting techniques and borrows doing so responsibly. Wow, there is a heck of a concept for a change.
• Let's stimulate Congress to prohibit or at least highly regulate (going forward, at least) the risky derivative products, CDSs and other complex financial products that the companies dealing in them are not even able to understand. Seriously, someone needs to look over their shoulders a bit, at least for those that survive, and make sure shareholders and others are not being at too much risk.
• Let's stimulate the continuing search for affordable alternative energy. Here, I might mention, I define "affordable"with all variables considered. Cost is one (somewhat big) factor, but we need to consider sustainability, environmental impact, our ability to eventually take economic advantage of it, and the availability of it worldwide. By the latter factor, I am referring to wind, earth thermal, wave energy and other technologies that are highly geographically oriented. (And you thought I spent all my time on financial stuff.)
• Let's stimulate jobs in the right areas, like environmental, education, health and the like. Obama is going there and I like it.
• Let's stimulate from the bottom up. The financial imbalance between the rich and the poor and middle class in this country has been setting new records this millennium. The recession is trimming that difference a bit. Well, it is not too healthy for this discrepancy to grow too large as the bottom 90% are those that support our economy. Even the top 10% need to realize their success is tied to the ability of the other 90% to make ends meet.

Just a few thoughts here. More later.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aXomybLEzm3U&refer=home

And as much as I like Obama's one plan, giving $300 billion in tax breaks for "stilumus" is wrong minded. Those recieving it I suspect will spend it the right way, as in paying down debt, not consumption, but when you call it stimulus, you suggest we want them to spend. He and Congress may want spending, but I want savings and debt reduction. Good old-fasioned values that need desperately to become new-fashioned imperatives.

http://www.bloomberg.com/apps/news?pid=20601087&sid=avkJ478jcrgo&refer=home

I do agree on Yellen on one point, however, this recession is going to be far longer and deeper than the garden variety. Good to see someone with a bit of street cred agreeing with me, though I do not like her solutions (not to downplay the street cred of Whitney, Roubini and the like).

Disclosures: None