It is a kind of honor for me that I’m pretty good about complex subjects and break them to understand all. So when I began to see the rescue plan, I imagined a conversation with a Y. O. To learn 10th How could I explain it and what questions would you ask? So here’s an imaginary conversation with Timmy, a smart 10 years old workbook 3rd with blue freckles. I know. I’m weird. What is the recovery plan? It is a way for the government to inject money to turn around an economy of shit. It does this by creating jobs, save jobs, and finally get people to spend money for things such as new cars, houses, investment and Xbox. Why do we need? Currently, many people are unemployed or not enough work to pay their bills. For this reason, they (consumers), no money to buy things, pay investment, savings, or taxes. Since consumers can not buy things you need to sell businesses not as much as they need to make a profit. Since companies do not use, they attract more people. See point 1 In addition, because people do not buy companies associated with investment is not so much profit, it means that the stock market down, because the stocks of companies that are not worth much in the habit. When the stock market, people are losing money they had there, you can not buy things, and stay away from more money in the stock market over a long period of time. On the commercial side, the companies have today is not the money that is usually the sale of shares to invest in creating new stuff. Back to step 1 again. As the stimulus package should solve this problem? Creation of new jobs does this mean? More people working, more people pay taxes, more people buy things, which means that companies do more things to more people, hire, and so on. Spiral upward. How long will it work? 1-5 years. Like most great bulk of the expenditure on the infrastructure or large construction projects, it’s time for the ballot instead. You do not start a massive development project in a few weeks or months. The advantage is that these projects have a much better return on investment long term. Many come to work for a long time. just takes a little time to start. Save existing jobs means? State and local authorities are begging. Because fewer people have jobs and spend less, get less tax states. Less taxes means they need to cut programs and personnel. Fewer staff, more unemployment. Downward spiral. How long will it work? Immediate. These are existing jobs to existing things. You can stop tomorrow if the government gives, state and local city funds. In addition, the workers pay the taxes on their income and more things to buy. This helps everyone. Give tax breaks What does this mean? If you have more money in your pocket because you pay less taxes, you will spend more money. How long will it work? Immediate 1 year. It depends on what kind of tax cuts, they are. If tax cuts are an employer, you will notice a difference in your paycheck to see immediately. If she credits or discounts on your taxes are late, you will not matter until you go pay your taxes in 2010. Another difficult issue in the context of tax breaks – $ 20 more a week in your paycheck to do everything to increase your expenses or consumer confidence? Would you not notice? I also believe that most people do not run out and buy a new big screen when their tax return next year. I think it will be used to pay off their credit card debt, student loans, car payments or mortgage loan balances have been achieved in the past year. Make a Better Future What’s this? Many of the provisions of the Recovery Plan are energy independence, the smart grid and education. These projects will also create many jobs. How long will it work? 5-10 years minimum. These investments should all pay plenty, but it will take some time. Energy independence and effectiveness ultimately facilitate our energy dependence to manage from the outside and to keep prices (or at least ensure that we buy, not countries) funding for education, theory, that the United States has more jobs, increased U.S. innovation, improving the employment rate, and increase our GDP. Does this fight in the last section of the Recovery Plan is to help people in need. This is a support group. Because so many people are unemployed, especially now that it will subsidize the health insurance and to extend to unemployment. How long will it work? Immediately. What is the cause of the recession begin? Simplification: greed and easy money. The banks lent money too easily spend in the hope of higher profits, the people too much credit for things they could not afford and the companies and people like risky investments in the hope of higher profits. For a time, banks lent 95-100% of the loans. This means that if you stop the payments, they your property (what you last bought with the loan). If your assets are worthless (think of the housing market collapse), are stuck then the banks have something that is not worth much money you paid for it. Because they have to do with the assets of that shit, they have no more money to other people money loan. If the bank can not lend, they can not even make a profit (the interest rates they charge for a loan). End result will fail – Bank. Now combine that with people losing their jobs and fragile consumer confidence. As a result, consumers are not buying so many things that need a loan, and do not stick money in the bank (the bank then turns around and loans to other persons) Vicious downward spiral. Other countries have recovery plans? Yeah. China has announced its own reorganization plan in December last year. China said it would be an estimated 586.000.000.000 $ over the next two years on new trains, subways and airports and the communities devastated by an earthquake in southwestern May to spend to rebuild. As a percentage of gross domestic product (how much money the country about the things he creates, is), is the plan to rescue China’s actually longer with us. Have we ever needed a recovery plan or have time before that was bad? Yeah. On several occasions. In particular, the Great Depression, which lasted from 1929 until the beginning of 1940th But there are some other methods that had been much smaller and shorter. Has a redevelopment plan has worked? Yup. But what has not as a redevelopment plan has been accurately determined. Most economists say that the government investment Huge in World War II is what finally led us out from the Great Depression. Teddy Roosevelt issued a series of programs, so-called “New Deal”, about 1933-1939, and began a slow tick up from 1933 (when it is at its lowest unemployment rate of 25%). But it really was, if we are committed and the Second World War was basically saying, to hell with the price, we need these military supplies as the country went to work construction. Because the public cost of the Second World War we had a huge budget deficit easily (10 times worse than it is now) in terms of our GDP. But taken in about four years (1946-1950 peaked at its best), not just the deficit from the negative, but we actually had a surplus in one of the few times in the history of the United States. Thank you for all these new business now pay taxes on any money they have made the people pay taxes on income improved, they buy from these companies, and people trust with consumers and orders all the money they have. Where the money is eligible for the stimulus package? This is an excellent question. For 31 of these 35 years we have a state deficit. This means that the government less than it spends to pay. It’s like you have $ 5000 in bills a month and make $ 3000 per month. This is not the same as the national debt. The national debt is owed money from the government taxpayers of other countries. It is like a credit card. You buy something on credit now and promise to repay it later, plus some additional charges for interest. Debt in itself is not necessarily a bad thing. But it is a bad thing if you run a deficit and have no real means to quickly address this deficit. to take to help finance your deficit on more debt when further increasing your deficit. Get it? Well, as we are for this dump 800 billion U.S. dollars in the economy, we pay $ 10th 7 trillion debt, and even a budget deficit of about 500 billion U.S. dollars? Option 1: We get about 50% of the money from our sale of state bonds to U.S. consumers, companies and banks. The Ministry of Finance, T-bills and bonds us to sell in exchange for a payment of interest. They generally pay interest rates pretty crappy, but if the stock market is in such turmoil, many people invest in them because they are very safe (The only time you lose money on a title are Treasury, if the entire government collapses, and if so, if you have a much bigger problem than losing your money). The demand for these securities to determine to what extent the interests of the State Treasury for the buyer pays. Option 2: We borrow money from other countries. This is usually about 30% percent of our debt (China is the largest purchaser of these days) Option 3: We still have about 20% of funding must be supported. Where is this coming? It seems that no one knows. reassuring eh! What are the dangers of these debts? There are many, many. Some important Tho. . . Scenario 1: The demand for government bonds is very low. This means that the Ministry of Finance to offer very high interest rates encourage people to buy it. This could lead to two problems. First, the banks have to invest a limited amount of funds. If it even more interesting for them to use the peoples savings to buy government bonds, either to lend money to people. . . they buy securities. This would help the opposite effect, the economy and would in fact make matters worse. to fight Scenario 2: Our debt buyers such as China. You do not want to invest in our debt, if they have their own problems. Scenario 3: If the Americans do not buy the debt, possibly in other countries step in. Is it possible to predict what would be the problem if China or another country has a majority of our debts? What if China decides it wants to become a tyrant? Imagine the meanest mother of all tyrants do in the school that you have. . . Your bike, your lunch money to your toy? And the only way you can make is that if he says it’s ok. It is a kind of what we are talking about. Is this really another Great Depression? It is a real possibility. Few people still speak, but the similarities with the global economic crisis are frightening enough. Most people think that the world economic crisis starting from a number of things. . . Similarity 1: Greed: The possibility of abuse on the part of consumers and banks. After the First World War the company had a surplus of inventory and introduced the idea of loans to help sell what they had. Because people felt very confident to win the war, they became fools orders on credit. It was a decade of wealth and benefit from new opportunities. Credit has to buy what you really do not. Similarity 2: stock market crash of 1929: In the early 1920s, as consumer confidence and huge amounts of money in the business are causing it to market bubble in the first 10 years before the accident. The share prices of unrealistic if they inflated compared to their actual value. Just as they were during the last 10 years for us. Then in 1928, or because the credit card debt in place and other factors, consumer confidence has been shaken, and then finally failed. In October 1929 on “Black Tuesday” the market suffered the greatest loss of 15 billion U.S. dollars in one day (think of how much 15 billion U.S. dollars in 1929, when a new car costs $ 250). A month later the stock market has had all the profits it lost in the last two years. Similarity 3: bank failure: before the Great Depression, many banks on loans granted to private individuals, companies and other countries to repay their war debts. They have also invested heavily in the stock market. As the recession in the few years to give to the world economic crisis, always default on their loans, the stock exchange and banks broke in the position they were not money in hand, so people like you and me, funds for outside their own account to withdraw. This provoked a new wave of panic that everyone is rushing the bank to withdraw their money from the oil on the fire. The result of failure: the bank. If the stimulus package to get to work? I think so. I hope so. The similarities with the world economic crisis and its causes are simply too striking to think that this will soon be over. But I think we have a chance to get out of it without having to use something as serious as the Great Depression. Here’s why: 1 Reason: The New Deal was Roosevelt’s very similar to the revival of which we speak now is not the expenditure of almost greater. He showed real signs of progress, but ultimately the huge investment in the Second World War led us out. The new recovery plan, the big ticket spending from the get-go built. Reason 2: There are a lot of faith and trust in Barak Obama. As consumer confidence plays a large role in depression, a trusted authority to share with people at regular intervals, in a clear, honest, really helps to communicate. Reason 3: I hope we have learned a few years on our planet and the mistakes we made in the past. I think we forget for a while. A good punch to the head is always useful to remember. That’s it. Hope this helped Timmy (you all). Come play Xbox. If you liked this article and thought it might be useful to someone, please forward. Even better, they say to visit the blog EvilGeniusTV. I said other things, smart time to time. As always, you get comments / criticisms / claims flirt / / yell / question below. Not always. JJReferences used in this article: LOL. Are you ready for this? Recovery plan unveiled – WSJ. Great Depression comAmerica’s – Causes and GDP release CuresBEA ProductBEA U.S. International Trade in Goods and ServicesFederal expenditure budget and national DebtForbes. com – Magazine Article GDP current statistics – summary of current U.S. GDP Statistics Great Depression – encyclopediaJust Wikipedia, the free encyclopediaGross gross domestic product – Wikipedia, the free the U.S. national debt – has MSNBC answer desk. comNews Analysis – components of the stimulus Vary speed and efficiency – NYTimes. comThe state budget, debt and deficit MarkTAW. comWhen Exchange Go Down, where the money GoNew Deal Goes – Wikipedia, the free encyclopedia Great Depression in the United States – MSN EncartaChina unveils comprehensive plan for the economy – NYTimes. Will Obama comWho stimulus spending of the funds in bull and bear market low-stimulus package Where the money go? ** Links are available on the blog.
