Will the Stimulus Package Really Stimulate the Economy?

Everyone heard already 2009 will go down in history as the year of the “Perfect Financial Storm” Must of what you heard is unappetizing and unprecedented. The U.S. unemployment rate will rise to at more than 12% as of this summer.  You also heard that banks will freeze loans, might call loans due, and the devaluation of the American dollar and stocks is creating a world widespread panic.  In addition you’ve learn about more nationwide layoffs (we’re only at the beginning) and the plummeting of real estate values in some markets by another 20% or more this year alone. 

Because of the general panic and the reality of how deep this recession is government came up with the American Recovery and Reinvestment Act of 2009.  A bill to create jobs, restore economic growth, and strengthen America's middle class through measures that modernize the nation's infrastructure, enhance America's energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect those in greatest need, and for other purposes.  All and all almost One Trillion dollars of money spending, now the question is will this be enough, is government doing the right thing.

With some things I agree and of course with others I totally disagree, but what really worries me is the believe of most people.  There’s a common, pervasive, and extremely dangerous belief that seems to permeate our society.  That dangerous, pervasive North American belief is that “government will take care of us.”  This is a real danger.

While you hear about billions to be spend here and there the reality is that none or very little of that money is going to trickle down to the individuals or small businesses.  Most of the money is going to bail out the big banks and the big interests which are not pumping it right back into the economy (remember the first 350 billion to bail out the banks?).  What the small business and the individuals are going to get is mainly tax breaks.  Simply put, if I get a 100% exemption or deduction against my income, and my income is $0 then my hefty tax break is a whopping $0. 

In an article by the Advocacy of the U.S. Small Business Administration titled “Small Business Drives the U.S. Economy” the article stated “Small business continues to drive the United States economy, according to a report issued today by the Office of Advocacy of the U.S. Small Business Administration. Newly released data show that in 2005, small businesses represented 99.7 percent of all the nation’s employer businesses. Data also show that they employed 57.4 million Americans or 50.6 percent of the non-farm private sector workforce.

Clearly small business is a major part of our economy,” said Thomas M. Sullivan, Chief Counsel for Advocacy. “Small businesses innovate and create new jobs at a faster rate than their larger competitors. They are nimble, creative, and a vital part of every community across the country. This report will help remind policymakers and others of the important role small business plays in the nation.”  Obviously government is not paying attention to what really matters, the small business.

In all of this, there is a light at the end of the tunnel.  Don’t wait for government to bail you out (actually I don’t think is going to happen).  Most entrepreneurs are creative and resourceful and we should put our head together to spin out this problem and create wealth like never before.  I am going to share with you a quick story that help me create wealth in times of great depression in Texas back in the 80’s.  The real estate market went south because of the oil industry crash in the mid 80’s.  I went through some hard times and even lost the first house that I bought (This was my first lesson in what can happen when you buy property almost nothing down at market prices, and little cash reserves).  I lost the first house, but I was able to hang on to the other ones.  In 1989 while the real estate industry was under a major correction, in Texas, thousands of properties where foreclosed every month.  My brother Alvin already had his real estate license and we started buying foreclosed property right in the middle of the Texas real estate depression.  We were able to buy houses with market values of $40,000-to-$50,000 for $8,000 to $15,000, most of them needing only cosmetic repairs. 

People thought that I was crazy then (There is a lot of similarity between Texas 80’s and today’s economy in general).  We were able to buy at deep discounted prices and rent or sell it at much higher prices.  The key was that we where able to use private lending and owner finance techniques that help us put people into housing since bank where not lending or were very strict on their  lending guidelines (any similarity today?), needless to say we started to stack properties and notes (owner finance notes) all of them performing.  Texas market got better and we started to cash out big times.  The rest is another story for another time. Folk's this is the time for the biggest transfer of wealth ever, the real question is, are you going to wait for a hand out? Or are you going to network with other investors, private lenders, etc, to claim a piece of the wealth pie?

Elmer Diaz has being actively investing in real estate for more than 25 years.  Aside from authoring books, articles as well as speaking all over the country on the area of “Real Estate Investment Business Mastery™”, Elmer successfully runs several businesses that he either bought or started and run successfully. You may reach Elmer Diaz at the following e-mail: askguruelmer@yahoo.com , or by phone at 1-877-609-7274 you can also visit one of his websites:  www.guruelmer.com