Any Ideas On How to Improve the Economy? Here's my crazy idea

Filed in Gather Money Essential by on January 17, 2008 0 Comments

Housing bubble, energy prices, food prices, interest rates, the weaking U.S. Dollar in foreign markets, job(less) rates, stock prices, outsourcing, health care, the list goes on and on. The topics are varied, but they all point to the same thing – the U.S. economy is having a bit of trouble.

Perhaps the big tipping point was the retail industry's disappointing holiday season. It's simple math – once people filled up their tanks to go to work, paid their bills and put food on the table, they just didn't have a lot of money to blow on presents. I'm going to go out on a limb and say that the millions of people who lost their homes in 2007 didn't spend much (if any) money on the holidays. The fewer presents bought, the lower the profit margins for retailers.

For many Americans, the economy has been an issue for quite a while. It's like the water levels on the Titanic. Those poor souls in third class drowned well before the people scrambling for the life boats. Rising food and energy prices are going to affect those with the least amount of wiggle room in their budgets before they affect anyone else.

This is an election year, so now that the middle and upper-middle classes are starting to feel the discomfort of a tightening belt, the politicians are starting to take notice. The retailers (Federated, Target, Wal-Mart, etc.) who had a lousy Christmas are also big corporations that are very good at bending the ears of politicians.

There are lots of theories on how to "fix" the economy – tax cuts (always a favorite), emphasis on education, import tariffs, less dependence on foreign oil, interest rate cuts, etc.

I have a radical idea which might be stupid enough to work. Cut the interest rates on everything to 2% for three months. Do it for credit cards, cars, houses. I'm not talking about offering 2% financing on a NEW card or towards a NEW vehicle. I mean taking someone's existing credit card, car or house payment of 7%, 10% or even 20% or more and making it 2% for three months. This would make millions of people's minimum payments smaller which would allow them to free up some cash for the spending that would give the economy a greater boost.

I know it sounds nuts, because this interest rate elimination would eat into the profits of the finance companies. That may be true, but writing off billions in bad loans isn't making them any money either.

If it were up to you, what would you do to stimulate the economy?

 

 

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