I have on more than one occasion received the following email, forwarded to me by friends and family:
There recently was an article in the Grand Rapids press in The Business Section asking
readers for ideas on: “How Would You Fix the Economy?”
I think this Terry Wallin guy nailed it!
Dear Mr. President,
Please find below my suggestion for fixing America ‘s economy. Instead of giving billions of dollars to companies that will squander the money on lavish parties and unearned bonuses, use the following plan. You can call it the “Patriotic Retirement Plan”:There are about 40 million people over 50 in the work force. Pay them $1 million apiece severance for early retirement with the following stipulations:
1) They MUST retire. Forty million job openings-Unemployment fixed.
2) They MUST buy a new American CAR. Forty million cars ordered–Auto industry fixed.3) They MUST either buy a house or pay off their mortgage–Housing Crisis fixed.
It can’t get any easier than that!!
P.S. If more money is needed, have all members in Congress pay their taxes…
Mr. President, while you’re at it, make Congress retire on Social Security and Medicare. I’ll bet both programs would be fixed pronto! No charge–Terry Wallin
If you think this would work, please forward to everyone you know. If not, please disregard.
I think it’s time to rebut this nonsense once and for all.
The author and proponents have no grasp for the difference in numbers involved – we’re talking orders of magnitude (OK, I’ll pause while many of you stop to look up the definition of ‘order of magnitude’…. got it? OK, continue…). As distasteful as it has been to give ‘billions’ of dollars to banks and automakers, people need to understand the difference between ‘billions’ and 40 trillion. Where’d I get 40 trillion? That’s the product of 40 million people over 50 and a bribe of $1 million dollars each. What’s the significance of this number? Well, at the end of 2008, there was only 9.1 trillion dollars in the entire money supply of the United States. Creating and dumping 40 trillion dollars into the money supply is not the same as dumping a few billion into the money supply. First of all, as strapped as we are for cash, coming up with billions is relatively easy. It can be borrowed or taken from tax receipts, resulting in little or no new money created. 40 trillion would have to be printed. There’s simply not that much existing money. Creating this amount of new money would be an event of cataclysmic proportions. First of all, this money would go through a multiplier effect known in monetary circles as velocity, through which it would increase by a factor of 9 in a matter of months, resulting in 400 trillion dollars. This is due to the Federal Reserve’s reserve requirement of 10% on deposits, but that’s another story.
The effect of all this would be massive, apocalyptic inflation almost overnight. Somehow the advertisement for the famous Little Caesar’s Hot-N-Ready pizza at a mere $215.00 doesn’t sound as attractive anymore. Worse though would be the effect on savings, Imagine that today you had $100,000 in the bank, for which you’d spent YEARS toiling, saving, delaying gratification until another day just to save up that money. In the back of your mind, you always knew that inflation would take it’s toll on that $100,000, but you had a pretty good idea of what it could buy. A couple of decked out Cadillacs… a nice house at a fire sale, ten really, really nice vacations… etc.
Poof…. overnight, your $100,000 now only has the purchasing power of $2,345 in yesterday’s money. Your two decked out Caddies shriveled into a 60 inch plasma TV right before your very eyes.
Oh, and that million dollars you were so happy to accept as a handout from the government, now is worth only $23,450 in terms of yesterday’s purchasing power. True enough, you could pay off your mortgage, whose value in absolute dollars did not change, but considering it’s been re-fi’d several times, it was probably MORE than your house was worth BEFORE the collapse in home prices. So let’s say that your mortgage was 200K, now you’re down to $800,000 which now has a purchasing power of $18,760 dollars in yesterday’s money. In TODAY’s money, how far will your remaining $800k last you when: A pizza is $215.00, a gallon of gas is $135.00, hell, you won’t even have enough money left to buy that coveted new American car, since it went from $25,000 to over a million dollars over night. That right there is precious!! Giving 40 million people a million dollars and then mandating that they buy an American car when they very inflation caused by their gift will price the car out of range. And that doesn’t even consider the effect of demand on price, merely the monetary effect.
I could get into the discussion of what constitutes an “American” car any more, but suffice it to say that my Honda Civic, built entirely in Indiana with all America parts, save for its transmission, fed a lot more Americans through its construction and sale than did my prior car, a Chevy Impala, built in Oshawa Canada, with parts from who knows where?
And so… our 40 million friends CANNOT afford to retire because inflation has rendered their IRAs and 401k’s to be worthless and their paltry million dollars isn’t enough to live on. We’ve wrecked the dollar and the economy much worse that it was before. We likely ended up in court deliberating which cars are American and which aren’t But all is not lost! If you can get your hands on $500 in ‘spare change’, perhaps in your pocket or under a sofa cushion, you can always pick up a six-pack and drown your sorrows.