Speaking from the unemployed state of Michigan, where the last economic growth was in 1997, yep, it is a depression!
Take a trip to your local mall and tell me if that looks to you like a depression:2razz:
Another note - the point was made that the ratio for banks funds to reserve rate is currently 17:1. That means banks are holding onto 17 times the required funds by law. Do you know where those funds are held that are not out on loan? Federal Reserve Notes - i.e. loaned to the government, where they earn interest.
Do you have a credible source to match this comment?
So the money is currently on loan to the government rather than the private sector. Without this money on loan to the government, the government would not be able to raise the funds to spend on the stimulus.
Wrong! The capital to secure deficit spending is handled through the sovereign debt market, of which foreign direct investment (FDI) is currently the primary purchaser of Treasury debt. Of course, other private banks do direct bidding for treasuries to be held in the form of assets, however the big players in the US sovereign debt market are the foreign trading interests that are holding dollars year in and year out. They are the ones who are financing US deficit spending for the most part.
And with all these record level spending projects; guess what? There is record demand and interest from foreigners to purchase our debt. Why? Because of fear. Holding dollars is risky business given the relative currency volatility we have experienced this past year, and guaranteed US debt is the choice by the majority of banking institutions and foreign governments.
So the money is flowing from the private sector to the government sector because the banks are being actively encouraged by the rate on the Fed Notes over the risk of making loans.
The interest paid on reserves is currently held constant to the FFR, of which is quite close to zero. However, this tool will be extremely helpful years ahead because of the eventual need to drain excess liquidity without invoking a recession ala Volker.
Also remember that an estimated 25% or so of the existing mortgages still outstanding are considered 'at risk'. If the banks do not hold sufficient reserves to handle when these loans go bad, then we are right back where we were in the fall of 2008. So the FED is encouraging the build up of reserves.
While i certainly agree that capital is needed in the event of further defaults, there are a slew of Fed and government programs (namely TARP and TALF) that facilitate such a need. If banks are so worried about risk, why the scramble to pay back TARP?
Also, do you have a credible source to back up your assertion?
After all is said and done, the government is soaking up capital from the system to be spent in the manner that the government wishes rather than the private sector directing the investment. Since some of this is payments of $6 Million to the PR firm that ran Hillary Clinton's 2008 presidential campaign to save all of 3 jobs, among other abuses, the 'stimulus' is not really stimulating the economy but rather paying off supporters. Not very efficient now is it? Oh, and what type of infrastructure for the benefit of the US is that?
How much of the infrastructure aspect is has been appropriated, planned, and spent? The above post is really just a rant without sound economic analysis.
Let's also look at the distribution of the stimulus spending. My company applied for a portion to help build high speed internet access for the thumb of Michigan - supplying a high speed internet option to over 1 million people who currently do not have an option short of satellite - at a cost less than one third the cost of satellite. Other companies applied for the same program in Michigan that could have covered the entire state with cheap high speed internet. Michigan, where the growth has been missing for over 10 years and leading the US in unemployment figures, no matter how you calculate it. How much of that stimulus money has reached Michigan? Less than $3 Million over the entire economy. Our project saw no awards in Michigan. There were only four states that got awards in our category: California, Illinois, New York, and Rhode Island. Yep, good stimulus there.[/quote]
Michigan stimulus came in the form of bailing out GM, and Chrysler. However, i have little doubt that the remaining stimulus money, if there is a need, will be appropriated accordingly.
If we actually were spending the stimulus money on infrastructure, I would not be as anti-stimulus as I am. But the stimulus money is being gifted to the Democratic supporters in obscene amounts that are not 'trickling down' or 'trickling up' or anything other than lining the pockets of many rich Democrats at the expense of everyone else in the US.
My largest qualm was the tax cut aspect, of which represents nearly a third of the entire act. But investing in health care and education is what as known as an indirect infrastructure investment, building more schools, offering more research grants, providing state funding shortfalls due to declining revenue, etc.... If you go back one year, you will see posts of mine arguing for a $1 trillion infrastructure stimulus alone, and my pissedoffness. Here, ill give you an example:
http://www.debatepolitics.com/breaking-news/43892-house-oks-787b-stimulus-bill-gop-opposition-12.html#post1057927304
Looking back, March of 2009 changed everything....