How will we be able to get out of the crisis?

The financial crisis that has hit the world has led to some very serious problems for a lot of countries, none more so than the United States. There is a lot of debate as to what has to be done to get us out of this crisis. This is actually not all that hard to answer; the challenge is in getting the government to actually do the things that are necessary to solve the problem.

The first thing that has to happen in order to get us out of the financial crisis is that we need to put a stop to all of the foreclosures that are going on. If people continue to be unable to make their mortgage payments the collapse of the housing market is just going to get worse. That means that people are going to need help to make sure that they are able to pay their mortgage. This can best be done so that they have more money available.

The next thing that has to happen is that the banks need to start lending money again, that means that they have to have money to lend. Realistically the only way that this will happen is if the government lends it to them. This is a tough sell politically because it was by and large the banks that got us into this mess. However the fact remains that the economy needs to have credit that is widely available and the only way that is going to happen is if the banks are recapitalized and the only way that is likely to happen is if the government helps them.

In order to get the economy moving the government is going to have to offer a stimulus package that works. The problem is that the plan that the government has offered has been to offer tax breaks in the hopes that it will stimulate the economy. It really hasn't worked, companies have become more profitable but they really haven't put people back to work. A far more effective approach would be for the government to invest in infrastructure projects. Unfortunately this is a tough sell politically because the government is broke and nobody wants to raise taxes.

The last thing that has to happen is that regulations have to be brought in to make sure that we don't have a repeat of the events that led us into the current crisis. This applies mainly to regulations on banks and other financial institutions. If people don't trust the banks they are not likely to risk their money, that means that there will be limited investment and limited growth for the economy. It is clear that in order to build this trust much stricter government oversight is going to be necessary. Unfortunately it doesn't look like that is going to happen either.