Tuesday, August 2, 2011

Ideas to put Americans to work

Look, I am not a brilliant person. I have just an average IQ. And while I have a business degree from Harvard, you wouldn't know it based on my writing, spelling abilities. I'm not the typical Harvard rocket scientist. I got into good schools because I worked my ass off and studied extraordinarily hard. And while I've been fairly successful in making money at my career choice of securities trading, I'm also realistic in assessing my skills on that front too. Much of it came from just being darn lucky. I consider myself an average Joe. I appreciate a good beer, don't shave very often, go barefooted much of the week, and only wear jeans. Maybe then I'm just a barely average Joe? Anyway, I do excel in one area. I apply common sense and always strive to keep it simple. We need to do some common sense, simple things right now to turn our country around. And I have a few ideas.

We can't reply on Congress to get anything of substance accomplished. We have morons in Congress, including Senator Richard Burr. And while our President is a smart man, he can't get anything of substance done either without the support of the Congressional morons. So if anything gets done, it gets accomplished by our Federal Reserve Board.

We need to support efforts by our Federal Reserve Board (FED) to turn around our economy. So far, our FED has made two primary efforts to jump start economic growth, widely referred to as QE1 and QE2. They are widely viewed as failures. Still, they can't give up. We can't give up. Our FED needs to continue tweaking and trying.  And we need to lend them our support.

In QE1, our FED used hundreds of billions to buy some pretty horrible assets from our weakened banks. The idea was to infuse banks with capital so they could lend. It did make our banks stronger. But it didn't work to stimulate our economy. Banks sold assets to the FED, but sat on the capital. The economy was so weak that they had few good lending opportunities. So, it was on to QE2.

In QE2, our FED used hundreds of Billions more to buy US Treasury Securities. The idea was to allow our banks to once again build capital, take advantage of the yield curve, borrow cheap ST, and invest for much higher yields LT. Those investments would push up asset prices, making people wealthier. Wealthy people spend more. And more spending would jump start our economy. It didn't quite work out that way. Our world's financial system became flush with cheap capital. Unfortunately, lacking better alternative investments, much of that capital found its way into energy and ag investments that wound up pushing up oil and food costs. That caused inflation to spike around the world. We saw it at the gas station and in the supermarket. And some think our FED's actions wound up causing massive protests over rising food costs in the middle east. That wound up in governments getting overthrown. So QE2 caused inflation and world-wide governmental instability, not so good.

The outcome of QE2 brought a massive amount of criticism down onto the shoulders of the FED. Congress got into the act and pointed fingers left and right at our FED. Maybe it was deserved. Maybe not. But at least the FED is trying to find the right actions to get our economy moving forward. That's much more than Americans can say about our hapless Congress. Given time and support from Americans, I have confidence that our FED can find ways to move our economy forward. You too need to support our FED. And you need to tell your Congressmen that you support our FED.

Why does the FED deserve the support of the average American? I can only tell you why I support our Fed, and hope you agree. First, these are extremely smart, well educated people. Second, many of them come from the real world and have not been in government their entire careers. Third, they are a small group of people, which can move quickly and act decisively. Fourth, they are led by a real human being, someone with a humble background, grew up in a small town, lived a middle class American life, and for gosh sakes, waited tables at that tacky South of the Border tourist trap off I-95! I'd rather trust a former waiter with the future of our economy than some stuck-up, arrogant Congressman, who's never worked a real job and was born with a silver spoon in his mouth. Bottom line - we need to support our FED.

Now, here come the common sense ideas that could come from our FED. The FED should embark on QE3. They will be reserved to do so, because Congress will try to stop them. But, we must tell our Congressmen to shut the hell up and back off. We must allow our FED to work unimpeded. There are some actions our FED could take now that would alleviate inflation issues in food and energy, and create a massive number of new jobs for our economy:

  1. Energy prices, especially oil, are high because supply is constrained. Our trade imbalance is also out of whack because we buy so much oil from the Middle East. So, to kill two birds with one stone, why doesn't the FED step in with programs that will greatly encourage energy development within our borders? They could either directly, or through our banks, subsidize loans to drillers, explorers, pipeline and storage owners and developers, and developers of all kinds of energy and supporting infrastructure ... hydro, nuke, nat gas, oil. Give anyone and everyone developing energy sources/infrastructure, loans that greatly push down their cost of capital. That would encourage, and pull forward, the development of energy sources within our borders. It would put people to work in America.
  2. The same should hold true with any and all Ag related investments in our country. We have massive amounts of underutilized land resources in our country that could be planted. And our Ag products could be exported the world over. Why don't we allow the FED to make subsidized loans to anyone and everyone willing to buy land and put it to use growing crops, where crops are not currently grown? I'm talking about ZERO percent interest loans. And maybe even entering into revenue/profit sharing arrangements where the farmer has little risk on the downside, but there are great upside rewards possible. Think about that. Our entire country would benefit. Higher supply would lower prices. Higher supply being exported to other nations would improve our trade balance and put our people to work. It takes numerous workers to move crops from field to port and onto international markets.

You see where I'm going with these ideas? Identify products/industries that are a source of constrained supply, contributing to inflationary pressures, and where Americans can be put to work within our borders. Flood those markets with cheap capital. We jack supply, cap inflation, and put Americans to work. Ag and Energy come to mind. But there could be many other niches within our economy where our FED could step in with cheap capital.

Ideas like these will never originate, or get passed by our Congress. Ideas like these can not get accomplished by our President either, because he must get support from Congress. But ideas like these can come from and get executed quickly by our FED. And while our FED has tried a couple things that have not worked as hoped, we can't shut them down. We must give our support to the ONE and ONLY governmental arm who can turn our situation around.

Give our Federal Reserve Board your support. Talk to your representatives in Congress. Tell them that you support our FED and they should just back off any criticisms they have about our FED's actions. Allow our FED to come forward with QE3 and beyond, and we may will find our nation on the road to a healing economy.

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