Economics

The Onion's Stimulus Plan

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Sounds like a classic bit of pump-priming, job-creation, get that cash flowing stimulus thinking, combined with a clever way to deal with Obama's call for how "we must stem the spread of foreclosures and falling home values for all Americans and do everything we can to help responsible homeowners stay in their homes." Via the Onion, here's the details:

We've got thousands of tradesmen out of work 'cause no one is building houses. Plumbers, guys who do drywall, the like—none of them have a job to go to in the morning. If the carpenters don't have jobs, then they aren't buying any lumber. Then the lumber guys don't have any money to buy dresses for their gals, and the dressmakers can't buy cars, and so on down the line.

You see? They need jobs, pronto, otherwise we're going to be sitting on a load of lumber and dresses and cars. So I say, give 'em some houses to build! Then they'd have some money to spread around, and the economy wouldn't be so bad.

….Wouldn't that leave us with a bunch of new houses and no one to live in them? Well, as it happens, with so many homes in foreclosure, there are a lot of folks right now who need a place to hang their hat…..These people who have lost their homes have no place to live…except for all these brand-new houses!….

Once we start building these new places and sell a few of them, word will get out, and before you know it, everybody's gonna want one. They'll pay out the nose for these new homes, because that's how these fad things work. It's called supply and demand.

So you'll have these crazy high prices, and the people who took the risk of building the homes will have the money they need to build even more homes. The cycle just keeps repeating itself, and the dough keeps rolling in!

This was working like a charm right up until the whole economy went south, and there's no reason it can't work again.

Of course, with folks so strapped for cash, you may wonder how they're going to get the money to pay for these new houses…… You see, normally, when banks give someone a loan, they have to sit around and wait for the money to trickle in one month at a time…..But what if—what if—the banks made a whole lot of loans really quickly, put a bunch of them together in a big package, or bundle, and then sold them to investors for some quick cash? They'd be turning a profit right away, so they wouldn't have to worry so much about whether people could pay back what they borrowed….

In related news, the actual Obama administration plan to save the housing market, including that

the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace….The increase announced today is not intended to indicate any estimate of possible losses with respect to the companies, but to provide assurance to market participants that Congress gave these companies a special purpose to support housing finance. Given the difficulties in the housing market today, we stand firmly behind their ability to provide that support.