The economy is in a gutter and deteriorating rapidly. There is no question about it if you’ve been following the economic data, currency fluctuations, treasury rates and other stats coming out lately. The trillion dollar question is what will spur people into spending and I can’t answer that question, I can answer what would spur ME into spending and here’s what I came up with:

1. I am NOT spending money because I continue to worry about bank failures. That whole “it’s FDIC insured” nonsense is just that, nonsense. FDIC doesn’t have enough cash to handle big bank failures which is why there have been so many shell games being played with these shotgun bank marriages lately. My money is locked up in Treasuries, cash (across multiple banks) and under my mattress. The solution at this point is to nationalize (completely) one or two of these major banks or just create a new Federal bank insured by the taxpayer not a questionably insolvent FDIC.

2. I am NOT spending nor investing money because I have no confidence in the stock market. I could be making about $3000 per month right now using ETF Covered Call strategy but I won’t budge on investing cash because I get the sense that as soon as I make a trade, the government (SEC) will jump in and change the rules of the games: No shorting? No call selling? No put buying? New tax regulations? Capital gains changes? Up until losing my job recently, I had just about given up on my 401k plan altogether and the only way to fix this problem, at least for me, is to change the draconian rules to allow 401k owners to invest ANY WAY they want rather than a small limited list of mutual funds that most companies offer in partnership with financial firms. I should be able to invest in ETFs, precious metals, real estate, treasures, etc DIRECTLY not just through a mutual fund company.

3. I would spend if I had a fixed low interest rate loan locked up. Everyone in America is on to the credit card game: teaser rate at 1.99% for 12 months then 29.99% thereafter, this type of immoral usury needs to end. If banks can’t make a profit at 9% interest rates then they need to cease existing. The defaulting problem can easily be solved by limiting credit lines. If mortgage rates hit 4%, rest assured, I’ll be buying a second home that’s priced reasonably. So if Uncle Sam wants to spend 1 trillion on projects, loan me a 100k at 3% and I’ll be sure to invest it and spend it wisely.

4. FIX Health care!  Health care costs are crippling individuals, families, small businesses, large corporations and pretty much everyone else.   You need to look no further than the plight of GM or Ford to understand the burden of health care on businesses.   Here is my three point plan:

a. Children from 0 to 18 get free health care.   Preventing and fixing problems when people are young can help eliminate many future costs.

b. After a person turns 18, they are put on a free base health care plan (mostly preventive medicine, exams, etc); this can be a nominal tax everyone pays as part of their payroll burden.

c. Allow for penalties and rewards in any supplemental health insurance plan.  If you’re fit you get a 5% discount, if you’re unfit you pay a 5% penalty.   If you smoke, you pay 5% extra on your health insurance plan.   If you visit the gym 3 times a week, you get a 5% discount.    The auto insurance industry isn’t out of control like the health insurance industry and part of the reason is that there are rewards and penalties for a person’s behavior.   Get too many speeding tickets, you’re insurance rate goes up; go to a defensive driving class and you’re insurance rate goes down.

If these things can be fixed then the economy might return to normal and people may be willing to spend.   As of today, I’m not spending a single dime on anything other than the bare necessities and I’ve been advising everyone to do the same.   When I return to work, I will NOT contribute to a 401k plan as my new plan is to simply horde cash.