Times are tough, really tough. Over 100,000 layoffs just last week alone. Gross Domestic Production down over 3% (the worst in over 25 years) and the price of houses continuing to go down. The government is trying everything it can to stop the stalling of the economy and get things going in a positive direction, but as governments tend to do, they get bogged down in politics, and move at the speed of a non-melting glacier.

The government’s Stimulus Package, wafting it’s way through the halls of congress, has been received less-than-warmly by the Republican party, and by a number of people, as “too much money, not enough bang”. Even though we’re badly in need of infrastructure spending on, well, EVERYTHING. It’s still an issue of “will it work?!??”

To date, no government stimulus package in history has had an immediate effect on the economy. The idea of trying to turn something akin to a supertanker on a dime, no matter how big the tug boat pushing the change, is insane. The economic situation didn’t happen overnight, there’s no reason to expect it will be solved overnight either.

There’s also the main reason that it’s going on for so long.

The Economic Culprit

There’s lots of blame to go around; Sub-prime mortgage lenders, greedy/stupid/inexperienced mortgagees getting in over their heads, people living FAR beyond their means and having to pay the piper. There’s no end to targets for what’s going on now. But there’s actually only one culprit that is the cause of all this strife.

Fear.

As bad as the subprime meltdown is, it’s only a small percentage of the overall loans in circulation. If the banks/agencies didn’t lose trust in each other and stop inter-bank lending, they would have been able to weather things better. One or two banks going under would have been a certainty, but without the ensuing panic selling by everyone, the markets wouldn’t have dived 40% in just a few short months.

Fear is also the cause for the continuing spate of layoffs going on. We’re in a death-spiral of fear and reaction to that fear.  

As people fear that their jobs are in danger, they scale back their spending, which causes the self-fulfilling prophecy of downsizing.

Businesses have no choice but to lay off people (or in a few cases, scale back on hours for many rather than lay off the few). As businesses lay off workers, a new wave of fear is released into the workforce.

Lather, rinse, repeat.

We end up in a spiral of self-perpetuating fear that only increase in speed as things get worse.

Think of it as an economic tornado – It starts up from a lot of wisps of wind, but combined has the destructive ability akin to a force of nature.

The final fear that is stalling us is the “fear of doing the wrong thing”. When we started down this path, Congress put together a $750 Billion stimulus package to try to forestall the downturn. But the initial actions didn’t (or haven’t seemed to) work. Each legislator after that has their own idea of what will work and what won’t. In reality, this is a situation that no one has encountered before. The fear that they might do the wrong thing causes delays, indecision, and political debate and maneuvering. All things that allow the situation to continue on and get worse.

Deciding to do nothing, even if it’s to stop and debate about the stimulus measures, is still a decision. And waiting for “something” to happen, can lead to that “something” being an undesired drop in the economy.

So, now we know the main culprit. What can we do?

Enter the Economic Militia

Like the Minute Men of the American Revolution, I think it’s time to get the brave souls out there and prepare for economic battle! There’s a small, but growing percentage of the population that has embraced the “live within your means” lifestyle and are weathering the storm. It may not be the best of times, but for them, it’s not the worst of times either.

It’s time for this Economic Militia to step up and start spending.

Just as the American infrastructure needs investment in it, I’m sure lots of American households need investment in them as well. So here’s my plan.

1. Plan - For those starting out in the frugal lifestyle, this may be what you’re in the midst of now. For others that have lived frugally, you’ve already done this step. Find out what your net income is and plan to live at 90% of that amount. Cut back on non-essentials until you have some available income. It won’t necessarily be easy, but we’re in the midst of a crisis here.
2. Invest – Start putting that money into investments (in a responsible way). Start padding your 401k and IRA accounts, Open up 529 Education accounts. Give to charities. Whatever it takes to start getting money circulating again. DO this responsibly, and show the government, the banks, and your neighbors and friends that you have confidence that things are going to come out better.
3. Get Green – As you invest, spend on things that encourage a move towards more responsible stewardship of our planet. Invest in companies that have strict pollution limiting policies, or companies that emphasize renewable resources and green-development. Vote with your greenbacks for a greener planet.
4. SPEND (Responsibly) – We know that you’re a responsible person living within your means. Now it’s time to benefit from that lifestyle. There’s hundreds of different consumer items, all on some kind of sale, that need a good home. Maybe it’s time to replace that car with a more gas-efficient, newer one. Bargain down the car dealer and help both him and the economy by replacing a vehicle. Take a look around the house for things that you’ve been meaning to replace/fix/upgrade, and DO IT. Sales abound, and good bargains are out there to be had for those with some money. Don’t go in debt to get new things, but invest that extra 10% you’ve made into things that both improve your life, and get money into circulation.

The rich are reeling from all the money they’ve lost over the last few months, and the overextended/poor don’t have the ability to get us out of this recession, what with just fighting to survive. It’s time for each and every member of the 5th Brigade of the Fiscally Responsible Economic Militia to grab up their checkbooks, and head out to the battle. With pen in hand, and a careful strategy of only engaging the enemy (fear) on our terms, we can defeat this Recession, and bring the victory of Economic Stability back home.

Are you going to do your part to help resolve the Recession? What do you think it will take? Leave us a comment and let us know.