President Obama, in announcing new mortgage relief on Wednesday, acknowledged that previous efforts to help homeowners had fallen short of expectations. And he did not do much to explain how his new effort, much of which would require Congressional approval, would fare much better.

http://www.nytimes.com/2012/02/02/business/mortgage-plan-targets-refinan...

***

Now, to be completely honest, here, the U.S. government has already used fiscal stimulus measures in an attempt to counter-act the global financial crisis and its attendant deflation (falling prices.)

In fact, the Chinese, themselves, years ago launched one of the biggest stimulus spending programs in the world and so did most every other country on the heels of the financial crisis.

Of course, all along, economists such as Nobel Prize winner Paul Krugman have argued, with respect to U.S. stimulus spending, that, "It wasn't nearly enough!"

In Krugman's doomsday analysis, the U.S. and world economy might fall into a deflationary depression until and unless the President and Congress can pass laws that authorize a lot more government spending, that, in turn stimulates the all-important and till-now flagging CONSUMER SPENDING.

That said, of course, we are HERE. And HERE seems to be a time when its unclear whether or not Mr. Obama can win re-election next November. Some say yes, others say no. And even those that are saying are smart enough to know that things could happen in the world or the economy between now and then that might actually determine the outcome.

First, Obama's plan to pass this mortgage rate cut for underwater but still working mortgagers is toast until after the election. For instance, even if it was the best idea since sliced toast, the Republicans are NOT going to give him the sort of assistance and credit that the ever very wily Obama just might use to squeeze out a victory in November.

All this brings me to my point: Is it likely that the U.S. government under ANY administration is going to muster the necessary consensus to re-start substantive federal stimulus spending?

Off hand, I'd say no. On the other hand, if gas prices zoom to $5 gallon, and other prices follow suit, then the voters and citizens might be in a mood to DEMAND that something be done.**

Then, only if the economy gets much worse should we expect more stimulus. Once we go down this road of using federal spending to try and "re-start" the 2005-2006 U.S. economy, then all sorts of things come to mind. The first one is Obama's proposal:

1. Refinance ALL underwater homeowners to the lowest possible rate of interest.

2. Allow all college borrowers -- either federal or private loans -- to renegotiate those loans at the lowest possible rates.

3. Require private credit card companies to slash the rates they charge; same with pay-day lenders; rent-to-own, etc.

And, more strenuous stimulus might include:

4. Home mortgage forgiveness for low-income folks.

5. School loan forgiveness for low and middle income folks.

That's about all of the stimulus stuff I can come up with for now.

Remember, as long as enough people remain afraid of the economy and cautious, then nothing bad can happen.

But when lots of people go to market and feel flush with confidence, then inflation or even hyperinflation could occur very quickly. Once they U.S. -- or any country -- embarks on the hyperinflation roller-coaster, it might be impossible to get off before the U.S. currency is effectively destroyed.

In other words, the stimulus stuff could be forced through with enough political heat. But this sort of fiscal stimulus carries the very real risk of hyperinflation and destruction of the USD, and of course, destruction of much of the U.S. and world economy.

Next Time: Is China Stockpiling Gold Bullion In Preparation for Introducing A Renminbi backed by GOLD???!!!

**Surging gas prices, however, would not likely be met with the sort of direct fiscal stimulus that, for instance, caused the gas prices to surge in the first place as it reduced the value of the dollar. On the other hand -- and I should have included this under various stimulus schemes, above -- the President could expand the definition of "energy" while increasing the size of the LIHEAP budget: The ordinary American could apply for help in paying not only their heating and cooling costs, but the costs of driving, also. Presto: LIHEAP checks might go out to Chevron, Exxon, and BP.