Downward and downward it goes

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By Harris L. Mayer

Dear Editor,

Two problems among many contribute to the downward spiral of the current recession. One is in the real economy-people are unemployed and more are fired every day. Their potential production is lost to the economy. The second is in the flow of money in the currently clogged financial system.

The solution to both lies in tieing the two together. If the unemployed are magically given back their original jobs at full pay, they will immediately put their earnings into the flow of money in the financial sector. As with many really good ideas, the angels are in the details.

Here are some ideas for the magic. Everyone who has lost a job in the last six months will be rehired in the former position, guaranteed with former salary and benefits for the next six months. But he will be paid by money from the unemployment insurance system rather than his employer. The costs will be funded by the U.S. Treasury.

Take as an example that there are 5 million rehires at an average cost of $40,000 per year for wages and benefits. The total cost will be $100 billion for six months.

Almost an that money will circulate through the financial system-all liquid flowing through ordinary channels like local banks, credit unions, and savings and loan institutions. Those funds will be much more effective than the bailout money previously put in at the top of the financial pyramid .

Where will this $100 billion come from? Perhaps from the Federal Reserve Bank whose mission is to ensure the flow of money through the financial system? Perhaps from the U.S. Treasury that can sell short term Treasury Bills at attractive yields, further increasing the flow of money in the upper stories of the financial structure.

The total flow of $100 billion could be available in one week if Congress could redirect unused funds authorized under the TARP; one bill on one subject to decide.

Los Alamos