What do you think should be done to fix the economy?

Question

What changes do you think should be done to fix the economy? just imagine if one day after a press conference you have the opportunity to ask a question about what he is going to do about the economy. Though you must say the many problems there are to give a couple of reasons to make him change the economy.

Answer 1

Fix it for good? For ever?

I think that would require a huge social upheaval not many people could stomach and certainly not the rich and/or powerful. Or the worlds governments either.

Lowering interest rates and encouraging more consumer debt is a short term solution. Like chucking more grease onto a rusty hinge instead of replacing the hinge.

The real problem with the economy comes from inequalities in wealth.

As while the economy "grows" so does consumer debt.

Growing consumer debt feeds all levels of a free market. Consumers borrow to buy houses, cars and everything else that shiny and gives us a thrill. Meanwhile the lenders make tidy profits on the credit interest rates and if you cant pay they'll take back your house or car whilst keeping all the money you've already paid for it. Kerching.

Inflation kicks in and the cost of everything starts to go up. People borrow more and eventually consumer debt rises to a level that means the consumers will not borrow any more or, much worse, cannot repay the outstanding debts. Once the borrowing dries up economic growth does as well.

The real solution here is to first encourage companies to truly invest in the lowest paid areas of their structure. Secondly give your economy's consumers education as to the risks of debt and set up legal restrictions for lenders which will make them as responsible for their credit arrangements as the borrowers (they can see you weren't going to be able to pay it back and so why did they lend you the money).

The first measure will increase solvency in the majority of people (the money starts to roll again) but for that to occur in real terms (above inflation pay increases) would probably have to mean companies accepting either loses in year on year growth (which doesn't mean actual monetary loses) or -ideally imo- decreases in pay

for the top tier of management.

The second set of measures (or something similar) would work towards rationing the growth in consumer debt in future. That would mean that although we wouldn't get the speedy growth of the past few years, we also wouldn't suffer such huge slowdowns.

Basically it comes down to this:

if you are poorly paid society should be trying to get you more money and, rich or poor, don't borrow money unless the repayments are well within your budget.

Answer 2

The first priority should be the abolition of the Federal Reserve.  According to the Austrian Theory of the Business Cycle (which FA Hayek won the Nobel Prize for, although it was actually Ludwig von Mises's theory originally), the Federal Reserve creates the boom-and-bust cycle through inflation that causes business owners to misinterpret interest rates and make unprofitable investments as a result (a recession is simply the name for what happens when these bad investments are exposed; this time, it was a credit bubble and a housing bubble).  In a Capitalist economy, the price trend is generally a deflationary trend across the entire economy (although the price of hiring a worker trends to inflate).  When the Fed inflates, the market doesn't adjust prices up immediately and therefore the rich bankers and government contractors that get the money first get to enrich themselves at the expense of the value of everybody else's money (widespread counterfeiting has the exact same effects on the economy as central banking, which is basically governmental counterfeiting).  The other problem with the Fed is that it funds other counterproductive federal government interventions into the economy and it funds wars (wars are nothing more than destruction of life and property on a massive scale).

The other thing that would help to fix the economy would be to repeal the 16th Amendment, abolishing the IRS and replacing it with nothing.  This would further undermine the ability of the government to engage in its myriad of counterproductive activity (bailouts of banks that encourage irresponsible lending practices, bailouts of parasitical entities such as Fannie and Freddie, government regulations designed to benefit big business by bankrupting the competition, governmental bans on viable alternative energy sources such as nuclear power and hemp ethanol etc.).

End the Fed and the IRS and the government will return to its constitutional size.

Answer 3

That first answer is total trash....

The first thing to do is abolish the federal reserve, let the interest rate return to a market level, and back the currency by gold.  The second thing to do is abolish the income tax and keep the govt out of the loan business.  The third thing to do is severely reduce government regulation.

Answer 4

the guy above said lower interest rates...studies show that a slightly higher interest rate over what is needed (say 0.25%) there is more investiment from international capital

Answer 5

I would first and foremost lower interest rates.  Interest rate are the incentive for investment.  Investment is what is necessary for economic growth.  Economic growth is necessary for an economy to...well...grow.  An economy needs to grow because if it doesn't, there is no incentive to achieve more.  One of the faculties of a well working economy is, in fact, the incentives that individuals face.  Aside from investment, I think it is important to have free trade for a country.  An economy is based on the idea of scarcity and using the scarce resources effectively.  By utilizing resources in their best way (and this is what trade does) we make use of scarce resources well.  I feel lower interest rates and free trade are 2 of the most important things.  Also, I believe a negative income tax would get rid of perverse incentives.  At times, public policies such as welfare cause these perverse incentives.  This is not a new discovery.  In fact, president Clintion realized this in 1994 (I may be wrong) and introduced work fare.  Obviously, when people are working, they increase there skills and productivity.  And, being that productivity is the necessary tools of a great economy, this is important.