Posted by Shyam Moondra
It's amazing to see how people have become used to the DJIA declining 500+ points a day. The ramifications are far reaching; the crash of financial and housing markets will inevitably lead to declining living standards and increasing poverty around the world. While people enjoyed the fruits of globalization when things were going great, now they must share the pain when the sky is literally falling down.
The question is what can we do now? The government has many other tools at its disposal that it can use to build up the investor and consumer confidence. One thing the federal government could do is to buy the stocks in the open market which will surely move the market up and improve the investor sentiment. At the current fire-sale stock prices, the tax-payers will eventually reap huge profits in a year or two when the stock markets reflect the true value of the corporations. Those profits could then be used by the new president to invest in education, health care, and infrastructure improvements.
Here is a list of what the government should do:
- FED and Treasury Department should buy stocks of major blue-chip high quality stocks in the open market at the current outrageously low prices.
- Extend FDIC insurance to all deposits regardless of the amount.
- Close-down weaker banks immediately, so that banks can start freely lending money among themselves.
- FRB should immediately lower funds rate by another 0.5%.
- FRB should extend credit to corporations and small businesses to avoid layoffs.
- Implement $700 bi bailout without any delay.
- Treasury Department should also buy foreclosed houses on sale and sell later when the housing market recovers, as was done during the last depression.
- President Bush should coordinate actions with EU, Japan, and China, and convince oil-rich countries to use their sovereign funds to invest in American companies.
