Giving Thanks for Government Spending

Thank goodness the government has money to spend.  The current administration is trying to stay afloat by throwing money at every large company that gives a hint of bankruptcy because we all know that the best way to teach a spendthrift how to become responsible with money is to give the person more money.

There are many different economic theories, one of which is budgeting.  Some say that the best way to teach someone how to manage money efficiently is to give the person a budget and if they use up the money before paying for all their bills, they will know better next time and be more careful with their money.

However, large corporations in the United States don’t have that problem.  Every time they looked close to running out of money, they would sell an asset, borrow from the bank, or issue more stocks.  Now, those options just aren’t available.  Money is tight so there are less people and companies with the money to buy stock and even those who do have the money are scared.

Look at Warren Buffet, considered a market genius.  He purchased a large stake in Goldman Sachs last month and now, just a month later, their shares are trading at half what they were.  If someone of Warren Buffet’s caliber can lose money in this market why should I think I can make something?  Why risk my future and retirement buying stocks that might be worthless next week.

Obviously the companies aren’t going to make money issuing new stock, instead that will likely make their current stock prices drop even further so what’s the next option.  Oh yeah, borrow money from the banks.  Except for one little problem, the banks aren’t lending money.  Yes, they claim they are.  In fact there are even reports that some entrepreneuring banks are even lending money for home purchases, but is that just an urban legend?  Besides, banks are scared silly right now because of all their bad mortgage debt so do you really think they are going to lend money to a business in this economy where nobody can afford to buy more than the necessities.

The companies could also try to sell off some assets, perhaps gets rid of a division that isn’t as profitable.  But once again, nobody’s buying.  Unfortunately, this vicious cycle will keep repeating itself unless there are some major changes.  Yes, keeping the companies in business now will save some jobs but that isn’t enough.  While saving jobs is great, we need to concentrate on ways to create more jobs to really kick start this economy.