Well, March certainly came storming
in with the Dow Jones Industrial average breaking 7000 and
the broader S&P 500 breaking 700. So will March go out
like a lamb? March is a very changeable month. Ancient peoples
believed that bad spirits could affect the weather (stock
market today) adversely, so they were cautious as to what
they did or did not do in certain situations. Those beliefs
often included ideas that there should be a balance in weather
and life (include the stock market here). So, if a month came
in bad (like a lion), it should go out good and calm (like
a lamb). Investors certainly have been cautious as there is
now over $4 trillion invested in money market funds. This
money is poised like a sleeping volcano ready to erupt and
pour money over the economic landscape. So what is holding
it back? Confidence, or should we say, a lack of confidence.
The economic news continues to be bad, but that is not the
real problem. Everyone knows that we are in a recession and
that the news is bad. However, investors are now looking beyond
the problems and looking for solutions.
There are many solutions being proposed to turn this economy
around. We favor free enterprise, the system that fostered
the creation of IBM, Hewlett Packard, Microsoft, Google and
thousands of other companies that have created jobs and improved
our standard of living. It is these and other startup companies
now waiting in the wings to move our economy forward. How
do we best help these new and existing companies create the
new technologies that will enhance the job market and our
standard of living? We have several ideas that others have
also expressed:
1. Over 70% of new jobs are created by small businesses.
These are the risk takers. Some remain mom-and-pop businesses
while others grow to employ thousands of people. We need
to make sure we do not tax them out of business. Many remain
mom-and-pop businesses and pay individual tax rates. We
need to keep tax rates low to encourage these people to
expand. Other small businesses incorporate and pay taxes
at about the 35% rate. The corporate tax rate should be
reduced to at most 25% to make their products and services
more competitive in the world economy.
2. We need an energy policy that reduces our reliance
on foreign oil. Research on renewable sources of energy
(wind, solar and others) is warranted, but for the time
being, we will need fossil fuels. Renewable sources of energy
supply less than 10% of our needs. By restricting and regulating
the further development of fossil fuels we are increasing
energy costs for individuals and businesses which will leave
less money to be saved and invested. When the economy turns
up, and it will, energy demand will increase again, and
we will be paying $4 plus for a gallon of gasoline again.
Increased energy costs hit hardest those that can least
afford them. Nuclear energy is being considered again. This
source burns clean, and we have plentiful supplies of uranium
here at home.
3. Re-evaluate the proposed cuts in our defense budget.
It’s a dangerous world out there, and we need to be
constantly vigilant. Our mainstay fighter plane, the F-16
is being grounded after one fell apart in mid-air. Its replacement,
the F-22 Raptor, is far more advanced than anything in the
air today. This program will probably be shelved. Likewise,
the production of the Navy’s stealth destroyer, a
ship that is virtually invisible to enemy radar and so loaded
with high-tech systems that they need only half the crew
as today’s destroyers is also questionable. Not only
will these defense projects provide millions of jobs, but
they will keep our shores and our airspace safe. Now that’s
a government stimulus plan that works.
4. Focus more on fixing our financial system. As soon
as investors and businesses feel that we have a workable
solution to the credit crisis and can obtain capital, and
as soon as lending institutions feel confident enough to
lend again, this economy will once again roar forward. Then
we can look forward to the next problem. That would be inflation
and isn’t that a pleasant thought at this time.
Everything is coming together for a turnaround. We just need
a jump-start, and a little more positive attitude would certainly
help.
Random thought for March 2009:
“I contend that for a nation to try to tax itself
into prosperity is like a man standing in a bucket and trying
to lift himself up by the handle.” - Winston Churchill
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