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What Would You Do With 825 Billion Dollars?

Written by | January 15th, 2009

This question was posed recently, after the government anced plans for another bailout. This one to the tune of $825 billion. If Congress ends up passing this bailout provision they will have the task of dividing up the funds across the country in various amounts to failing corporations, banks, states and municipalities. I suspect very little, if any, will actually reach the average working stiff. But it is fun to think about what we might spend it on were we blessed, or cursed depending upon your perspective, with having a massive bank account with those kinds of funds available.

Some of the people commenting on this have suggested they would spend massive amounts on ousting Mugabi and restoring economic stability to Zimbabwe. This could very well work, except for one serious flaw. Consider that whenever an economy is flush with cash, the standard of living is immediately thrust upward. People who are living at or near poverty suddenly becoming wealthy would lead to untold problems. Being immediately flush with cash, and never having the necessity to learn about money management, the buying spree would create an expectation of deservedness. Businesses wouldn’t be able to keep up with demand, jobs would be outsourced to areas of lower economic expense and attitudes toward money would change dramatically. This doesn’t mean it would be bad for everyone. Many people will take their bounty, invest wisely and refrain from spending like a drunken sailor, and hopefully when the masses have spent their wads of cash, the savers and investors will still have a nice nest egg to manage when the chips finally fall. Of course this could never happen … could it?

Through various government actions and inactions, coupled with lax corporate policies, the US has put itself in this exact position. While we didn’t have a mysterious benefactor step in and restore economic stability, we did have a period of extraordinary growth in spending just prior to 2004. Economic indicators suggest that people were beginning to spend significantly more than they earned. This unearned income came in the form of credit cards, home equity lines of credit, mortgage loans and all other sorts of credit instruments. In their desire to bolster profits, corporate America turned a blind eye to inevitable doom and gave out loans to anyone who was breathing and some who weren’t. Of course Washington also turned a blind eye to the problem because it would be unpopular with the people. We want things, things we cannot afford but are subliminally entranced into believing we deserve, by an unprecedented advertising campaign. I suspect there are very few people in this country who did not get at least one unsolicited “Get your easy mortgage here!” phone call while trying to enjoy dinner.

So, lenders gave out cash, and consumers consumed. When the well went dry, they went back and dug themselves in just a little deeper. Each time getting pushing America, and the world, close to the precipice. When lenders finally said “there is no more cash in the pot”, people begin to panic. Panic is never a good thing for an economy. When people panic, they do things that they wouldn’t normally do if they were thinking rationally. The biggest thing people do is horde cash … they question “what if”. Well, the problem is that the sudden cease of spending causes widespread rapid deflation, i.e. recession, and if left unchecked depression and high unemployment. Then people find it difficult to revert to an earlier lifestyle, particularly in today’s economy where nearly every service comes with a 2 year contract attached. 

Many years ago, a good friend of mine told a story of a military pilot in 1954 flying into a South American country. While on leave, the pilot was approached by a young boy selling large bags of roasted peanuts for a nickel. The young boy was about 8 and he was pulling a large wagon with sideboards laden with as many bags of peanuts as he could pull. Considering he really liked roasted peanuts and the price was right, the pilot told the young boy to deliver them all to his hotel. When the boy delivered them the total price was less than $2, but the pilot figured they were much more expensive in the US and were worth at least $20. Feeling a bit magnanimous, the pilot reached into his pocket and gave the young boy a crisp $10 bill for his trouble. The problem here was that $10 wasn’t a huge amount for the pilot, but $10 was the equivalent to about 3 months of wages for the average person. Suddenly, this young man was wealthy beyond belief and the economic stability of the entire area was sent into a downward spiral, all because a small boy had been given a $10 bill. It was reported there were riots in the boy’s neighborhood and several people were injured. Upon returning to the US, the pilot was immediately reprimanded and demoted a rank for his part in the incident.

Of course we aren’t talking about peanuts, but we are talking about upsetting the economic stability by giving people more than they can deal with responsibly. This is exactly what happened in our economy. People were spending other peoples money uncontrollably, then they failed to return it as promised. Almost single handedly, the greed of people was the undoing of the economy. Boom times may be nice, but behind every boom is a bust, some larger than others.

Think about what you would do with $825 billion. Would you help a starving world and in the process make them dependant upon your cash? Would you simply help a few people with a cash influx to allow them a bit more time to get their finances in order, only to give them unfounded security? What about supporting your local civic organization and charities? Funding cancer research would be nice … All of these are noble causes, but unless they are handled properly, the net result will be failure.

I know what I would do with $825 billion. The first thing I would do is eliminate my debt, then without worry of a job, I would make myself available to provide unexpected joy to others, in a small yet meaningful way. You see, I don’t want to make a name for myself giving away tens of millions of dollars to people. Eventually it would run out and in the end, people wouldn’t remember me or the reason I helped them. Instead, I would be the guy standing in the grocery store, providing an unexpected windfall, just enough to pay a struggling family’s bill. Perhaps I would send the lawn care folks over to cut the grass of a disabled person. It isn’t the big things that people do, but the small things that bring joy to others. That is what I would do.

What would you do?

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5 thoughts on “What Would You Do With 825 Billion Dollars?

  1. markross

    K,
    I don't "think" that this is the sort of answer that you are looking for. However, (for now) my short answer is…

    I would likely convert the money to Japanese Yen, which (I believe) is still backed up by gold; and possibly to other precious metals as well.

    I have been thinking a lot about tangibles (over paper) these days.

    Mark

    Reply
  2. markross

    Of course, realistically, I could not even begin to speculate as to what I would “truly” do if I had that kind of money; I really do not think that anyone “realistically” can.

    I can say that life would change dramatically and “not” necessarily for the better.

    I’m sure that I would do the natural things, like travel a lot, and there would be a certain level of security; there would also be a larger burden, in many ways, as well. Knowing myself, I would certainly be charitable, as well.

    I can not say for sure if I would not get irrational, and do foolish things as I have never realistically been in that position. There are many people in this world that are rich, yet very miserable. There are also many poor people that can be happy.

    That being said, there is no doubt that money, in today’s society, does bring security.

    Looking at it from tax payer’s money and the government; well, that is a whole different story.
    For every question asked, there will certainly be a different opinion given, on that subject.
    To a large degree, politics, even economics are philosophical, and different people have different philosophies.

    Now, did I agree with that 700 billion dollar bailout? NO WAY!
    In fact, if one reads my posts, it is right there, in black and white, “over” and “over” again.
    I do not believe that “perpetual” failure should be rewarded, and by doing so, the government has officially made themselves enablers to failure, and have even given the people who do not want to work hard; or a person who is “completely” for entitlements, a new leg to stand on.

    The government has already opened Pandora’s Box; by giving all of that money to companies that have CEO’s getting paid millions, while crying poor; flying around in private jets; union leaders with multi-million dollar getaways; and banks that are hording these funds; it is only natural that the people are going to say, where’s mine? Oh yes, and the best part is that The Federal government will not disclose as to where these funds were “specifically” allocated to.
    I know that Fox Business News has a lawsuit against The Feds for full disclosure of these funds; so hats off to them, for sure.

    We truly do have millions upon millions of citizens that are up against hard times, right now.
    Some is because of their bad decisions, some because of naive decisions, and some is because of governmental decisions. However, fair is fair…I believe that the government has “exacerbated” the perception that bailouts are within reason.

    That being said, I do believe that this next wave of funds, (800 billion) will be more popular to the citizens, “if” it is used to help the citizens, in these hard times.

    I want to emphasize that I am not condoning any of these bailout funds, nor am I saying that it is by any means, fiscally responsible; nor do I see too many great ideas by the government, on the horizon. However, I do see the people yearning for their slice of the pie; after all, it is our (tax) money, is it not?

    So, I am lead to believe that if the new administration gives more to the people, then they certainly will win the popularity of the people, I am just not sure what box we will open, after Pandora’s Box is empty; at which point, we “may” go full-circle, then start blaming the new administration for their bad decisions.

    Mark

    Reply
  3. markross

    Well K,
    As of today, January, 28th, we now know what the government is planning to do with the funds.
    It passed through The House, on the way to The Senate.

    Some of the proposals, in this so called stimulus package, is really unbelievable.

    Reply
  4. KEB Post author

    I need some stimulus, because I feel like I am getting screwed. I have looked at some of the proposals and it sickens me to know that our government will spend billions of dollars on a plan that is doomed to fail. It didn’t work in the 30s, it didn’t work in Japan, and I have serious doubts about whether it will work now.

    Of course the big issue here is that we are going to borrow this money from who?
    Foreign nationals
    If we don’t borrow the money, what will happen?
    The dollar will fall, inflation will rise considerably and the position will be exacerbated.

    A wise man once told me that you can never borrow yourself out of a financial problem. It is as true today as it was some 20 years ago.

    This country can ill afford to borrow money it cannot conceivably pay back. The net result will be a bankrupt economy that will take years to recover.

    Reply
  5. markross

    I too heard some of the proposals when watching Foxnews last night; in fact, check out Bill O’s Talking Points from last night, 1/28. http://www.foxnews.com/oreilly/index.html
    He has some pretty insightful and balanced analysis.

    It is pretty scary! Dick Morris was on Bill’s show last night, and he basically painted a pretty gloomy future for us. Now, Dick Morris is a pretty cynical guy, however, a lot of what he predicts, is pretty dam accurate.

    I feel like we are all getting screwed, and  think of your kids and grandchildren who “may” not know the same America that we once knew. I think you are right about inflation, only it will likely become a hyper-inflation, as predicted by Morris, leading to another recession worse then this one. The people better speak up now, or don’t bitch later, because later may be too late.

    You are absolutely right, we can not and should not be trying to borrow, and spend our way out of this. Hello! Over-consumption, and debt was/is a major cause of this entire problem, and we are going to use that same model of borrowing to try to repair this?

    There was a short term, common-sense answer that could have stimulated the economy, and given immediate help to just about all Americans, and that was “immediate” tax cuts, on income, and unemployment benefits, for now. Perhaps, a one time stimulus check, and that is it.  Then, after that, we could have accessed the situation in another three, or six months.

    No, it sounds to me like there is a clear agenda that is being pushed through, which is clearly bigger then “just” stimulating the economy.

    I think WW2, not the huge spending, got us out The Great Depression, however, back then, the war spurred the economy; nowadays, war is “extremely” costly; hell, Iraq is costing 10 billion a month; that is a lot of money man.

    A lot of annalists are saying this, and I have to agree…Obama is staking his entire presidency on this package; if I were him, I would have stepped into it a little slower and more rationally, starting with the income tax cuts. He seems like a pretty rational guy, however, this package (to me) is not too rational.

    Also, have you seen what is happening in Iceland and Europe?

    Mark

    Reply

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