Corporation with cash and the economy - Essay Example

In economics, this is what is called the chicken and egg solution for a given economic problem of solving a crisis. The questions remain, do we haveto create jobs first to increase consumer’s spending capacity or do we have to encourage spending first so that business enterprise will have an incentive to produce and create more? Depending on one’s point view, both perspectives can present a sound argument on which should come first, create jobs or encourage spending? Meanwhile, our country’s economy remains sluggish.

The sad part of this scenario which is the current predicament of the United States economy is that this recent crisis is self-inflicted. We created a crisis in our minds that no fiscal and monetary tools of lowering interest rates and pumping more money can solve this economic woe. Even if there is enough money, people will adopt a conservative stance and will not spend it thus contracting the economy making government intervention pointless. This is truer with big business which was able to generate that much savings because it did not spend the money it earned from lowering its cost from downsizing its manpower and other cost-cutting measures and contributing significantly to the situation that we are in.

This could be the worst form of an economic crisis-crisis of confidence. This crisis is horrible because it is psychological in nature that the traditional Keynesian solution will not work. If this situation will continue, it will not be far fetch that our economy will suffer a double dip crisis of which we may not be able to recover.It is easier said than done that had we had faith in our economy, we could have recovered already. There is available money that is enough to create jobs that will encourage domestic consumption to rehabilitate the economy.

The government does not have to pump in precious taxpayers’ money in the system anymore for it to recover. We just created a fear that is debilitating us that sends a spiral of economic contagion which contracts our economy into an impending crisis. Savings may be good but when we are not using it out of fear to the effect that it contracts our economy, the effect is more catastrophic. So what is to be done? First, our policy makers must get their acts together to inspire confidence that our economy will be going somewhere.

The recent debacle over the debt ceiling fueled that conservatism which is hampering our recovery. Second, we must do our part as citizens of this great country. That includes big business and us, consumers. Businesses should do the collective and patriotic act of pumping the economy by expanding and hiring more employees. We in turn consumers should patronize their expansions by spending to give investors the incentive of taking the risks. Above all, businesses should expand their operations here, in the United States so that jobs will stay and consumers should patronize the products that are made here for our own companies to grow.

The worst thing that could be done at this time is to repatriate those capitals abroad that would help other economies to recover instead of our own.This can be done. In 1997 financial crisis, the Koreans contributed gold to their government and spent money in their domestic economy to help their economies recover. As a result, they were among the first country who recovered from that crisis. We should be able to do better than them, we are Americans.http://www.financialpost.com/related/topics/Billion+dollar+corporate+cash+hoard+reflects+concerns+borrowers/3733713/story.html