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After recommending yesterday that our leaders should stimulate the economy by investing in infrastructure rather than mad money stimulus, and after discussing this with some business associates, I have a few more thoughts I'd like to share.
We have been hearing that 70% of our economy has been supported by the American consumer. Congress and the President have agreed on -- or colluded, depending on who you speak with -- a bi-partisan economic stimulus package. When, and if, the check arrives in the mail, there might be short-term glee among the populous. But if it is used just to stimulate more consumption, then it will only serve to postpone the pain by some time -- perhaps a month or two.
If I get anything back, I will be using it to reduce debt or invest in equity and nothing else. I hope my fellow citizens are able to understand that reducing debt or investing in equity has some value, while consuming, that is, rushing out to buy a flat-screen television or a new PlayStation, is a complete waste of a one-time opportunity.
By the same token, the government should be thinking about how to stimulate productivity, not consumption. This would go a long way to reduce the national debt and our trade deficits in the long term. Our focus on consumption is the major difference between us and our trading partners. China, India, Korea, Singapore, Taiwan and the rest are working hard on increasing productivity (through infrastructure and education), and we are financing them with our consumption.
This means that while they increase their equity around the world, we increase our debt. While they strengthen their currency, ours practically free falls. While they have increased power in the world, ours is diminished. This is a trend that must be stopped or some time in the future we may still live in the United States, but in actuality we will only be renting it from others.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.
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Reader Comments (Page 1 of 1)
3-07-2008 @ 7:38AM
VINCENT BENFANTE said...
MY FELLOW AMERICANS THIS REBATE CHECK IS ONLY A ///// bandaid /////// FOR OUR COUNTRY.
THERE SO MUCH MORE WE NEED TO GET ON FEET ON THE GROUND./////// IT ALL STEMS FROM OUR GOVERNMENT ALLOWING THIS SITUATION TO ARISE. NOW THAT IT CAME TO BITE THEM IN THE
/////////////////////// A S S //////////////////////
THEY WANT TO BRING THE COUNTRY BACK.
///////////// CASE CLOSED ////////////////////
3-07-2008 @ 8:52AM
Marilyn said...
Oh what bull!!!! I have been unemployed since June 2007 and filing taxes for the unemployment checks of $275 made me owe. So guess what!!! They KEEP MY BIG REBATE CHECK. Not only do I not stimulate anything but have to figure out how to survior since our GREAT GOVERMENT... you know the one that proudly says " for the people" didn't pas to extend the unemployment benifits. Boy ... with a check each week I could buy food, gas to look for a job and pay bills.... Isn't that stimulating the economy better that no rebate!! Wake UP GOVERMENT!!!!!! THERE ARE NO JOBS OUT HERE!!! MORE COMPANIES ARE LAYING OFF AS WE SPEAK!
3-07-2008 @ 11:30AM
Sheldon L said...
Marilyn,
Thank you for sharing you view. It is unfortunate you are in the such circumstances. However you prove my point. If the government gave you the $275 or any small stipend it would be gone in a month and our economy would be in worse shape, even less capable of providing jobs for anyone.
Using the money to create jobs would help more people for a longer period of time. We need to increase your opportunities, not throw a few bucks at you while we drive back to congress or the White House. And perhaps worse, put more people in your situation.