How to restore growth - you can help too!

Unless you've been in a coma for the last month, there is a very infinitesimal chance that you've missed on doomsday news about the global market meltdown and you may be already experiencing some economic pain yourself by now.

Bad news: it's only the beginning.

Good news: there's a (quick) way out. Provided that everybody plays the game, though.

Classical economic theory goes like this: in times of crisis, the government should spend more in order to compensate for the shrinking private sector until things get eventually better. Keynes was putting it that way:
“There are today many wellwishers of their country who believe that the most useful thing which they and their neighbours can do to mend the situation is to save more than usual . . . Now in certain circumstances all this would be right, but in present circumstances it is quite wrong. Suppose we were to stop spending our incomes altogether and were to save the lot. Why, everyone would be out of work. And before long we would have no incomes to spend . . . Now is the time for municipalities to be busy and act with all kinds of sensible improvements . . ." From a radio talk by J.M. Keynes, January 14 1931 (reprinted in Essays in Persuasion - [thanks FT.com])

But let's face it: the USD 700bn rescue package accepted by the US lawmakers is equivalent to roughly USD 2'400 per American. Provided that this money is spent over one year that means USD 200 per month per person or a little over USD 6.5 per day per person. And this is only going to buy back "toxic" assets from financial institutions. Hoping that this will restore confidence and, eventually, liquidity and back to business attitude.

What about the rest of the economy?

Well, instead of saving for worse days and thus precipitating the slowdown into a full blown recession, each one of us could take his favorite wallet or credit card and get out to spend a little more than usual.

Remember: consumption represents 70% of GDP. Imagine the impact and ripple effect on both the economy and confidence factors.

Save the economy, go out and spend!