Spitting in the Wind

Bloomberg suspects that the latest move in Washington's flailing efforts to save a drowning economy, the $200 billion to stimulate consumer lending in the form of car loans and credit cards and the $600 billion in mortgage loans, is spitting into the wind. As a sailor, I suspect their metaphor is poorly chosen, since that one refers to an act that is going to make you devoutly wish you had not done it. I think that "spitting into the ocean" would be more apt, meaning an action that is completely futile.

Consumers are already saddled with excessive debt at this point and, additionally, unable to pay existing debt let alone any addon. So who, precisely, are banks going to lend this $200 billion to? Certainly not to the increasing ranks of unemployed workers.

In creating the push of mortgage money, rates have dropped but banks aversion to risk has not, so I'm guessing that most of it is going to go for refinancing sound mortgages at lower rates. Since the tax incentives have not lured new buyers into purchasing the glut of unsold homes, it seems unlikely that the simple availability of money is going to. And, again, who are the buyers? Certainly not the growing ranks of unemployed and those who are fearful of losing their jobs.

But what if the push to lend was successful? Where would that put us? It would put us right back into the same economy that failed, an economy based on consumer spending and easy credit. If it wasn't sustainable then, why do we think it will be sustainable now?

We are engaging in the form of insanity that consists of "doing the same thing over and over again, each time expecting different results." Except that it may be mere stupidity. Insanity is excusable, the insane person is not in command of his/her actions.

Stupidity is just plain stupid. We need January 20th. Soon