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| Discussion Topic: Letter to Senator Roy Ashburn | Posted By | ||
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To the Honorable Senator Roy Ashburn
I would like to share a letter I wrote to our Senator Roy Ashburn. Please feel free to post your comments. If you agree with me and don't want our government putting our posterity into massive debt, with its huge deficit, and you don't want your taxes increased, vote on Tuesday. Call Senator Roy Asburn (661-323-0443) and your US Senators and Representatives. Get involved. Call the Bakersfield Califorian. It won't happen if people think that President Obama and the government will take care of it. They are not on the same wavelength as we are. They are not hearing us. We have to shout all together, at the same time, for our representatives to do what we want them to do, (Let us improve our financial condition, increase our freedom, maintain our responsibilities) for our families and ourselves, now and in the future. The power is ours. We are the R.E.B.E.L.Es
Letter
I am sending you this information to inform you that there is another way to stimulate the economy, increase employment and end the recession.
By enacting the policy changes I am purposing, it will stimulate the entire California economy. It will increase more people's disposable income faster and by a greater amount than the federal government's huge deficit.
By increasing people's disposable income, this will increase demand. With increased demand, production and service companies will want to increase production and services. They will want to employ the unemployed, increasing their disposable incomes, there-by restarting the economy.
With the economy restarted and less people unemployed, it will reduce government's liabilities and increase state and local government revenues, thus the budget will be balanced.
I don't think the props will pass. We are going to need a Plan B. I know that the federal stimulus money comes with directions on how to spend it. Perhaps if you and I explain to the Governor how this plan would benefit the California's entire economy, he could obtain an exemption from President Obama. We could lead the other states to do the same. The federal government may take a closer look at what it is doing to our nation with its huge deficit. (Weakening the dollar by increasing the money supply without increasing supply, this will cause interest rates and communities prices to go up creating inflation, increasing the cost of our production, which makes our exports more expensive, increasing our trade imbalance, weakening the dollar further).
As far as real estate is concerned, the tax credits are too narrow to stimulate the economy enough to restart the economy. Most first time homebuyers do not pay enough income taxes to make the tax credit a viable stimuli. People, who pay that amount of taxes, are more likely to already own a home.
Enclosed you will find a copy of a letter I sent to the editor of the Bakersfield Californian and two articles from the Alternative Stimulus Plan.
Stabilize The Economy For The Future
The collapse of our economy was caused by the sub-prime mortgage industry and by people that did not understand the dangers of credit. Add in greed, and you have the perfect storm heading towards a major economic crisis.
I have been working on the problem of excessive use of credit, when prices are increasing (inflation) for quite a while. The government is not addressing this core problem of all recessions since 1945. The currant government's policies, to end the recession, are the same as they have been since World War II.
Huge deficits and increased government programs and regulations lead to another round of inflation, ending in a recession. Both major political parties use these same policies. Many economists support these policies. I disagree.
These economic policies are policies that John Maynard Keynes, the renowned British economist of the 1930s created before he was considered an economist. Many of the economist of his time thought he was incorrect in his theories. But he was correct in his time, in an inefficient way. These economic policies, I believe, are not suitable for our modern economy. They are slow and inefficient.
Our economy has changed tremendously since the 1930s. We have more safety nets in place. The main means of exchange in the 1930s was paper money. In our economy the primary means of exchange is credit. People have become more aware of credit and are not concerned about going into debt.
The new policies I want enacted will improve our economy and bring our economy out of recession, without creating another inflation cycle, which would end in another recession.
I believe, that if the Alternative Economic Stimulus Plan had been in place, the recession would not have gone as deep and the severity of the collapse of the stock market and employment would not have been as bad.
Article Number One
INTEREST RATE REDUCTION
I want you to ask yourself three questions?
1.What is the first thing the Fed does to stimulate the economy?
Answer: Lower interest rates, this permits people and business to refinance their debt at a lower rate of interest, which in turn lowers their monthly payments, freeing up monthly income, which increases their disposable income. With more disposable income, people have money to spend on other things, other than interest payments.
2. Why did it not work this time?
Answer: Collateral prices were going down. Banks or investors cannot refinance people’s loans until the price of the collateral stabilizes. When the banks did not follow the Fed’s lead, of lowering interest rates, it made the deflation worse, creating the collapse of employment and the stock market. The enterprise-capitalistic economic system cannot operate without a means of exchange.
3. How do we solve this problem?
Answer: The banks cannot lower their interest rates low enough because of the risk factor of the collateral’s price going down. They have to make a profit and pay a high enough interest rate to keep their depositors satisfied. The secondary securities market is froze up for the same reasons. Fannie Mae and Freddie Mac can only offer market rate loans, which will help, but they are not low enough to jolt the economy back to life. The Fed is the only one buying the mortgage securities created by Fannie Mae and Freddie Mac because they are fixed rate mortgages and investors can see another round of inflation in the near future. This is why the government’s thirty-year bond auction failed in May 2009. As unemployment continues more mortgage defaults are going to occur. This will create more mortgages that will go into foreclosure. This will reduce investor and consumer confidence, in there long term planning for the future.
President Obama's plan to correct the problem of homes that are underwater is not going to help the majority of homeowner, because most homes are underwater more than 5%. These people are anchored down to their homes and cannot be mobile, reducing their ability to relocate to find employment; there-by increasing the chances they will abandon their homes to the bank. Read the Alternative Economic Stimulus Plan on how these problems can be solved.
The US Treasury, which is a not for profit government agency, can borrow the money from the Fed, just like the banks do, and fund the refinanced and new mortgages, at near cost, until the collateral’s price stops decreasing and investors start investing in the new mortgage securities. When a recession occurs investors and other people take their money out of the stock market, investments and banks and buy US treasure notes. The Treasury can put this money back into the economy by obtaining it on the open market and funding the refinanced and new mortgages. This policy will not expand the money supply.
The Treasury would receive the cash flow to fund more mortgages. When the economy is up and running again the Treasury would sell the mortgages to investors.
The banks and other financial institutions would arrange these new loans and mortgages or modification agreements. The banks will make huge amounts of money rewriting the mortgages and servicing them. Thereby the banks will become profitable and the fees and servicing charges will help capitalize the banks. The non-performing assets will become performing assets decreasing their loses.
It has always been the 90% of the working population who spend their money and pay their bills that brings the economy out of recession. Helping the other 10% is a noble effort, but it is not enough economic stimuli to bring us out of this deep recession. When the disposable income of the 90% increases, with their good credit rating, they are able obtain credit, which expands the money supply. They can spend money on household goods and services, big-ticket items, autos and trucks ECT. With increased demand, businesses will increase production and employ the unemployed people, increasing more people’s incomes. When the economy comes out of recession this will help the other 10% more than any government program.
Article Number Two
STABILIZE YOUR HOME’S VALUE.
All across this nation people have seen their home values decrease. There are three things that must be done to maintain the price of your home.
1. Enact the Zero Inflation Taxation policy. This policy will increase the confidence of investors, to make long-term money investments, creating a market for 30yr mortgages. It will automatically change the income tax, as economic conditions change in our economy, from recession to the inflation cycle. This policy change will reduce the excessive use of credit during the inflation cycle, which creates higher inflation rates.
2. Interest rates are too high. All through the 1930s the banks kept interest rates 400 to 600% or more above the deflation and inflation rate, making the Great Depression worst than it should have been. (www.Crestmont/Reach.com) After World War II, interest rates have not been over 100% above the CPI. Currently mortgage interest rates are 550% above the annual deflation rate (CPI), and increasing, as deflation increases.
We must create mortgages that have interest rates that are no more than 200 to 300 percent above the Consumer Price Index. Maintain mortgage interest rates with Adjustable Rate Mortgages at no more than 50 to 100% above the C.P.I. The U.S. Treasury would fund these mortgages, at cost, until the banks have the confidents to lower their mortgage rates and investors start investing in mortgages securities. Then the Treasury would sell the mortgages to investors.
Since we are united nation, it would better for our economy if the federal government adopted the Alternative Economic Stimulus Plan, because it would increase economic activity in all the states. Our economy would recover much faster.
Separate states can do it on their own by rerouting the money from other stimulus programs and the federal stimulus money, to create net lower interest rates for mortgages, by paying part of the interest cost of all home mortgages, say 2%. The state would reduce the amount paid by the state by 1/4% each year until normal economic activity was reestablished or until the market rate for interest rates was reached. Since credit is our primary means of exchange, this policy would allow the state to create its own currency, reducing the Federal Government's power over the state. Interests charges are the cost and profit the Capitalistic entity charges the enterprise entity to maintain the bookkeeping system of our economy. So when the state pays part of the cost of the bookkeeping, it is not paying for a part of the home, it is paying for a part of the bookkeeping cost. Increased economic activity and employment would replace government’s expenditures for this economic recovery plan.
Lower interest rates would stimulate the economy, without huge government deficits. By decreasing mortgage rates by 50%, mortgage payments would decrease. A $1500.00 monthly interest mortgage payment would decrease to $750.00. That is a $750.00 stimulus check every month for 30 yrs. Nov.’s 08 C.P.I. was a negative 1.9%. A 3% starting mortgage rate would be 490% above the deflation rate. This policy will make housing affordable. It will bring more buyers into the market and eliminate the foreclosure problem. With safe guards included, the chance of another housing bubble occurring is practically nil. Read ALTERNATIVE ECONOMIC STIMULUS PLAN
When the economy is correctly guided it will produce more tax revenues for federal, state and local governments without raising taxes, as the California Congress has done. The tax increases can then be eliminated and the government reduced in size.
3. Call! President Obama 202-456-1111 Fax 202-456-2461 Treasurer Tim Geithner Fax 202-622-2000 Opinions? www.bakersfield.com or www.contactingcongress.com Blog this information across the country.
The last four letters in American are I CAN. We can do this together and as a nation of free people. We are responsible for the laws and policies our economy is guided by.
Free info. http://www.economysflaw.wordpress.com
Leonard C. Tekaat is a retired economic Analyst, Financier, Investor, businessman, author, and a former Candidate for California Congress. He has experience in the financial world of over 40 years.
Economic policy papers by the author are: 1.ZERO INFLATION TAXATION POLICY 2.ALTERNATIVE ECONOMIC STIMULUS PLAN 3.REPEATING THE MISTAKES OF THE GREAT DEPRESSION 4.HOW TO REDUCE OIL IMPORTS WITHOUT CAP AND TRADE 5.STIMULATE THE ECONOMY WITHOUT A HUGE DEFICIT 6.LETTER TO US TREASURY TIMATHY GEITHNER 7.STABILIZE THE VALUE OF YOUR HOME and other articles.
Copyright by Leonard C. Tekaat all rights reserved
Saturday, May 16, 2009 at 9:45 am
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