Problems currently facing the US Economy:
- Bank liquidity
- Consumer Cash flow
- House prices falling
- Consumers with no money due to mortgages, loss of jobs, etc
- Job market contracting
- Retail and Auto industries experiencing 20 year lows
Solution: The 4% Plan
While the government is very busy loaning money to help shore up many industries, this is a not a good long term solution to correcting what ails our U.S. economy. If the money does not end up in the individual consumer’s hands, it cannot correct the fundamental problem in the economy, which is based on spending, specifically consumer spending. Consumer spending creates jobs, liquidity for the companies that end up with the money, activity that helps banks increase their cash position, etc…
Many consumers currently either cannot pay their mortgages, or don’t really see the point in paying for their homes because there is no or little equity in their homes currently. The best possible answer is to have the government offer every mortgage holder a 4% loan, and then the following things would happen:
- Most every mortgage holder would trade in their current mortgage for a 4% fixed, 30 year mortgage. No qualification process…if you are current (or can get current) with your existing mortgage(s), you would automatically be approved.
- Banks would receive the liquidity they need by having the existing mortgages paid off more quickly than planned – thus creating bank cash flow, and putting the banks in position to begin lending again and help fuel the economy from the lending side.
- Consumers would be able to more easily afford their house payments and would actually create additional capital for the consumer to put back into the economy – US consumers are active spenders and would use the additional capital thus creating a more active retail and automotive environment.
- House prices would likely stabilize and get the housing market back on its feet…housing creates as much as 50% of the US jobs, so this is the industry that the US needs to focus on the most to get our economy back up and moving.
- The government is currently lending money at ½% so the 4% money would actually be a good government investment and the investment would truly be in America and its citizens, as opposed to any single corporation or group of corporations. The government could have Fanny and Freddie administrate the loans and stay out of the lending business that has them in so much trouble, or the administration of the loans could be outsourced to more efficient servicers. This would also create new jobs.
