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A Simple Government "Bailout" Proposal |
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Wednesday, 05 March 2008 |
Analysts and "capitalists" addicted to government money will be proposing a lot of solutions to the housing bubble and overall economic situation. I have an idea for a government "bailout." How about they stop spending more money than we have?
A housing bubble like this can have a large impact on the economy, affecting both construction and consumer spending habits. However, its not the only factor that threatens to make the next few years a financial nightmare. Even as housing declines in nominal value, that is, the "sticker price," the value of those dollars is also rapidly declining in value. Sure this is great for exporters (because they can turn American products into foreign currency) but this means domestic prices go up even for domestically produced goods. Supply and demand applies to the currency as well. As long as that currency represents a debt or a deficit, the "global market" knows that it will inevitably lose value as investors choose a currency with more sound fundamentals. Just think of any company stock - do you want to buy the company that borrows to stay afloat, or the one with money left over to invest in future operations? I don't have a Ph.D. in economy, but I'm pretty sure the government could make this mess a lot more bareable just by spending less money and not trying to throw cash at every real or imaginary problem that pops up.
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Last Updated ( Wednesday, 09 April 2008 )
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