by Vince Smith

Created on: March 09, 2009

There is no simple solution to fixing our economy. It is an immensely complicated and complex problem with many different layers of issues to deal with before it can begin to head in the other direction.

At the core of the problem is the lack of credit being granted to consumers, which keeps businesses such as the auto industry from selling what they make to the average consumer. It also keeps anyone but those with the best credit from purchasing a home, which keeps us from cutting into the inventory of unsold homes lying vacant. A lot of those are in the hands of banks and financial institutions who foreclosed on them and cannot sell them, which puts them in financial trouble... which in turn keeps them from lending money to anybody.

How do we break this cycle? Well, the attempts to shore up the banking system by pouring money into banks that are losing money doesn't appear to be working, as the banks are just trying to stop bleeding money and survive. Lending you money for a house that you might not be able to make payments on soon scares them to death, so they won't do it. Instead, I believe we would be better served having the government issue low interest loans to people who have decent credit to be used to buy houses from the banks at a reduced rate. This would generate cash flow for the government and for the banks while stimulating the economy at the same time.

Once people have a house with a lower payment, it will free up money to save in the ailing banks, to buy cars and goods they have not been buying since the economy went downhill. Imagine if you made the same amount of money but your house payment was 30 to 70 percent less! I'm thinking you'd start spending money again that was freed up for you by the government, which would pump a bunch of money into the economy and turn things around. Once that happens, everything else will take care of itself.

Consumer confidence will return when they hear the news telling them that sales are up in retail and other markets, which will get those companies to stop laying off and start hiring again. Those people that go back to work will be able to spend money again, possibly on a house from the government which will start it all over again.

The economy will snowball in the right direction instead of the downward spiral it's in now and America will be the prosperous country it should be once more. I believe it will work, and I'm hoping our President and his economic advisers sees this and runs with it.

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