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Thursday, May 28

I don't think America's economic recovery will be consumer driven.

Mark Cuban has been brainstorming, which is what wealthy business investors are supposed to do.  He's proposed a "use it or lose it" prepaid debt card for about $1,200 for each American household. Well, 1,200 bucks is a drop in the bucket next to what millions of American households need at this time. And I think many people would demand to use the debit card to pay for rent and other critical necessities, rather than helping to boost sales at stores even if the stores are in desperate straits. 

Right now at least one big rental company in Washington, DC is allowing tenants to work out long-term rent payments, and this is probably the same for big rental companies and mortgage lenders across the USA where pandemic lockdowns have brought business to a virtual standstill. 

But these are stopgap measures that can't hold for many more months if tenants and homeowners who are now months behind on their payments can't get work at a high enough salary that will allow them to repay. 

Mark Cuban's other idea is somewhat more realistic:
Cuban has also called for the implementation of a transitional federally-guaranteed jobs program to jumpstart a recovery giving people "confidence in their jobs."
But he's talking about making a temporary industry out of Covid:
"We're going to have to have a transitional, not permanent transitional federal jobs program,” he said, linking such efforts to the massive COVID-19 testing regime that’s been touted as a linchpin of getting the economy restarted.
“And so we're going to need to hire people, millions of people, you know, preferably for testing, tracing, tracking, supporting vulnerable populations, long-term care, you know, giving people jobs that they know, are stable, because that gives them the impetus to spend money," Cuban added.
I'm sorry but Cuban isn't confronting how badly Americans have been burned. They know there's no such thing as a temporary stable job.  Give them temporary jobs and they will save whatever money they can from the salaries, not make the kind of retail purchases that might save stores. 

The government needs to throw in the towel and create millions of long-term jobs in industries that build and repair infrastructure in the United States -- and in other countries. 

In short, the government needs to copy Beijing's vast make-work scheme for Chinese citizens, also known as the Belt and Road Initiative. Part of doing this would be to set up an American version of the World Bank. 

Such a bank would also sop up Americans who aren't fit to do actual construction work but have skills that a construction/reconstruction bank needs such as accounting, statistics, engineering, and the hosts of 'soft' sciences that contribute to numerous types of World Bank-funded projects around the world that aren't purely construction. 

Standing in the way of an American Bank has been  'geopolitics.' The U.S. state department and various other American players haven't wanted to relinquish the U.S. role at the World Bank because it gives them leverage with other Bank members.  

They need to change their thinking.  This needs to be done fast because of the really bad news, which the Yahoo! report today about Mark Cuban's debit card idea explains:
For many businesses, the future is uncertain. Some can't afford to bring back laid-off employees because they can only operate at partial capacity.
The other challenge they face is that 68% of people on unemployment are currently making more than they did in their previous job. In the past 10 weeks, more than 40 million Americans filed for unemployment insurance.
With much of the economy still shut down, “employers can't afford to bring them back. So they're stuck in never Never-never land,” Cuban said. “That's a huge problem."
Why yes, it's a huge problem, and it will an even huger problem when the unemployment benefits run out or are scaled back:  
The $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March, expanded existing unemployment benefits by adding an extra $600 weekly payment on top of the amount someone receives under state law through. However, Cuban pointed out that those extended benefits are expected to run out before August.
Against this, Cuban expects Americans to use a prepaid debt card to buy clothes and appliances? I think he's dreaming. 

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