[Clyde Slick]

On 14 Feb, 21:39, Herbert Hoover wrote:
On 2009-02-14 15:54:53 -0500, Clyde Slick said:





sure, it has purpose on its own merits, but the infrastructure
improvements are not a "road" to sustained economic recovery.

We should faciltate the creation of private sector jobs that will
permamanent jobs.

The stimulus package provides temporary funds to
*fix some things that are needed and wrok on other things that are
not.
But most of it will not stimulate sustained growth or activity.

The one bright spot I see is talk about finally buying
up the bad loans and rewriting them into something
reasonable that owners can afford.
It should have been done months ago, before Obama came in.
This whole mess is mostly a credit, banking, equitry, and mortgage
crisis.

Clyde, there are multipliers at work here. Certain sorts of fiscal and
monetary policies can have what are known as multiplier effects. One of
the things you're trying to do is increase the velocity of the money
supply. Think of that as increasing the numbers of people who get to
":touch" the money."

The construction worker gets paid, buys groceries, goes to the mo vies,
maybe takes his family out to eat (and so on). Each of those activities
takes some of the money paid to the worker and passes it on t others,
who in turn pass that on to others, hence the multiplier effect.


its like bouncing a ball, the bounce gets lower, and it ends.
the construction worker is out od a job again'in three or six months,
he stops buying stuff, the people who sold or made the stuff, there
income drops back down, and they stop buying stuff


Do enough of this and one actually increases the money supply. How?
Well, enough people buying from a supplier may cause that supplier to
borrow mony to finance new inventory, When that loan is processed, the
bank may literaly be creating new *money to make that loan.

\

so you have trouble with the concept tha a permanaent
increase in private sector activity is superior to temporary
government spending that incites a temporary ioncrease
in private sector activity.



* * * * If you want a more detailed explanation, e-mail me. It can get fairly
complicated. If you're really intent on rewriting mortgages, you need
to explain what you mean by that. There is huge moral hazard lurking
here. Remember that there's no point in rewriting a mortgage if the
homeowner can't afford the new payments either. If you reduce the
principal thereby making payments smaller, not only will there will be
a huge tax bill due, but you're making fools out of all the people
struggling to pay off their mortgages the old fashioned way.

* * * * So what are you proposing? There are ideas out there, but I'd like to
hear yours.



that's why it would have been better to start rewriting mortgages
three months
ago. the loans are a liability to the lenders, they are dragging the
institutions down.
Now, institutional and homeowner equity is even lower than it was
three months ago.

Oh, the people paying off their mortgages the old fashioned way are
also being hurt
by 20 to 25% loss in home values, on the margin, that means generally,
a range of 50 to 100%
loss of whatever home equity they HAD. Your argument is based on envy,
that someone gets
soemthing they don't. But not doing it drives everyone down.
Sort of like the idea behind communism, everyone has to suffer
greatly, so that nobody
has an advantage