What’s the Solution?

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The government has pumped trillions of dollars into our financial system in stimulus packages and credit guarantees.   Stimulus money has made our banks awash in credit, and in normal circumstances it is expected that banks would lend this excess  and such lending by banks would spur economic growth.  But banks today, anticipating further loan losses are reluctant to lend in this recessionary environment.  Many of us have heard of instances where creditworthy customers have been denied a loan or loan terms being rather onerous. The private credit markets remain frozen and as a result, the net available credit for commercial enterprises and individuals is low. The economy in the meanwhile, starved of credit remains mired in a recession.  

In the light of these circumstances, the Obama administration has begun to contemplate yet another stimulus package to revive the economy.  But our government debt has already reached staggering proportions. It’s now approaching 80% of our gross domestic product or GDP. Given the circumstances, would such a move be a prudent one, and more importantly will such a move lead to a robust economic recovery?

The alternative of course is that the government does not do anything and let the economy wobble until it is able to regain its footing on its own. That of course brings up the specter of a protracted recession similar to one in Japan in the 90’s, or worse still, the great depression.

So what is the solution? I would like to invite your comments and thoughts on the current economic crisis.

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About the author:

Marc Lewyn is the co-creator of Guided Wealth Transformation™  a revolutionary new process that helps one use not just their wealth but all of their resources to create the life that they desire and enhance the lives of people  they care about. Learn more about Marc >

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