More stimulus, please

So there are some articles out there that suggest that more stimulus is needed. I agree. It's strange to me that we have some people saying that this is a crisis of liquidity, and that if we just get the banks balance sheets stable, then they will start lending again and all will be well. But who will they lend to? Every month more and more data is coming in showing that demand is down and people are saving more, even though they are refinancing their homes because rates are so low. But the extra money that comes from refinancing is either being saved or being used to pay down debt, not got out and buy more stuff. Look at the chart below:


The last time that the amount of debt that everyone had matched GDP was in 1929. THAT wasn't a liquidity crisis then and the same holds true today. So that means that just adding more money to the banks won't help, because what's really going on is not a crisis in liquidity, but really is a huge market correction that we borrowed too much and now we have to pay off all that debt we accumulated. It's like the economy is a casino, and we as citizens are the patrons of that casino. We've been gambling all this money and have been winning some, but just borrowing more. But now the crisis is like our bookie has come to collect his tab, so we stop gambling to pay off the tab. But since we've stopped gambling, the casino isn't making money so everything stops, jobs are lost, etc. So the government steps in and says "We'll just pay off the bookies so that people will start gambling again." But people aren't gambling because they realized gambling is stupid, the bookies suck, and there are better things to do with your money. So what now?

Newt Gingrich was on ABC's 'This Week with George Stephenopolis' (spelling, I know) and he said one thing that I completely agree with: Just get out all the bad news now and take the hit in the market. I totally agree with that. You can't keep sweeping the bad news that the banks are in way over their heads under the rug because it's likely that the dirt under the rug is so huge that it will all come out anyways and just prolonging it won't help everybody. What's great about this approach is that you let the news out, things go really bad, worse then Lehman bad, and then you can sell another stimulus package to congress. Now you can avoid giving out more bailout money to these idiot banks who don't deserve it and should go under. On a side note, I just love hearing these bankers advocate for a free market with no regulation. That's fine, but if you want it that way you have to accept the good with the bad. But banks want it (and are getting it) both ways. When times are good, they get rich. When times are bad, they get bailed out and stay rich. If they are such advocates for 'free markets' then they should lose their shirts when times are bad. The banks are like spoiled children who know they can have it both ways and refuse to (or can't) see any other reality. I say SCREW THE BANKS. Yes, I know that probably hurts me, but I think I'll be fine in the long run, and I will be giving my son less debt when I'm old and it's his turn to help run things.

So the only way out of this, and to really, truly get the economy going again, is to create jobs and make it so that people are saving, but they are also spending. That means stimulus. Wages need to increase to offset the fact that people won't be using debt to purchase more stuff. That has proven to be unsustainable over the long period. But wage increases, which have been stagnant over the last few years, provide real growth and actual extra money to people to spend. People like the middle class that actually have to buy things to get by.