stimulus plans

Temporary plans are not helpful because they don't change behavior and they don't do what is truly necessary right now: support and increase incomes.

Asset bubbles like we have had (i.e. soaring asset values supported by rising levels of leverage) always end in a deflationary spiral (unless the fed chairman is Alan Greenspan, in which case they just engineer a new asset bubble and push the inevitable issues out further into the future).

So what does that mean -- deflationary spiral? It means that asset prices deflate or decline and as they do they pull everything else down with them. Businesses use asset values (whether we mean financial assets or manufacturing assets or human capital assets) to generate income, which they can use to pay dividends, buyback stock, make acquisitions, pay down debt, etc. Households provide labor for businesses and often own a large asset in the form of a home. Household income and the value of the house supports the mortgage used to purchase the home. As asset values drop -- businesses earn less income and that means layoffs, which means consumers will have lower incomes and have less to spend. Lower income makes debt service more difficult. Falling house prices makes it more likely the household can't service their debts -- either through income or through the value of the home. that increases foreclosures, which pressures asset prices even more. Bottom line is that the dramatic fall off in incomes is one of the main reasons the Great Depression was so bad.

Handing out $250 checks is nice -- and predictable in an election year -- but its a one time thing that has no impact on the economy's ability to generate incomes and service its huge leverage.

hopefully someone will come up with the brilliant idea to lower tax rates -- even more than the bush tax cuts. lower tax rates help sustain and increase incomes.

with the democrats assuming they are coming to power in a big way later this year, probably nothing happens on this front this year.