A range of less conventional ideas for creating jobs can be found beyond the narrow Washington conversation, however. They aren’t necessarily politically correct–but that doesn’t mean they would not be effective. It’s not like anything else we’ve been trying lately has been working.

Here are five of the best so-crazy-they-just-might-work ideas to get the economy back on track.

1. Bulldoze excess housing stock

The struggling housing sector continues to exert a drag on the economy as a whole.

Five ideas to create jobs that are so crazy they might just work | The Lookout – Yahoo! News
Technorati Tags: economy, jobs, unemployment

Myth 3: The U.S. is sliding into "socialism"

From Personal Finance News from Yahoo! Finance

For a system allegedly being strangled in its bed, U.S. capitalism seems to be in astonishingly robust shape.

Numbers published by the Federal Reserve a few weeks ago show that corporate profit margins have just hit record levels. Indeed. Andrew Smithers, the well-regarded financial consultant and author of "Wall Street Revalued," calculates from the Fed's latest Flow of Funds report that corporate profit margins rocketed to 36% in the first quarter. Since records began in 1947 they have never been this high. The highest they got under Ronald Reagan was 30%.

The picture is also similar when you exclude financials.

The Dow Jones Industrial Average (^DJI – News) is above 10,000. Small company stocks have rallied astonishingly since early last year: The Russell 2000 index is back to levels seen not long before Lehman imploded. Meanwhile Cap Gemini's latest Wealth Report notes that the North American rich saw an 18% jump in their wealth last year.

Meanwhile, federal spending, about 25% of the economy this year, is expected to fall to about 23% by 2013. In 1983, under Ronald Reagan, it hit 23.5%. In the early 1990s it was around 22%. Some socialism.

These days, three-fifths of the entire budget goes on just three things: Insurance for our old age (through Social Security and Medicare), defense, and debt interest.

Conservatives don't want to cut the $700 billion-plus we spend on defense. We can't cut debt interest payments. And while Social Security and Medicare certainly need reform, the main "problems" are simply rising life expectancy and health care demands. If we didn't provide for the insurance through our taxes we'd have to do it individually.

What about the rest of the budget? It's jumped from around 7% of GDP a few years ago to about 10% now. Out of control? It's been in the 6% to 9% range for decades. It's forecast to fall to about 8% again in a few years.

So much for a revolution. But here comes the counter-revolution just the same.

It's socialism because we have a Democrat in the office of the President. It's "trickle down" when we have a Republican in office. Let's see:

• Corporate profits up – CHECK
• Stock market up – CHECK
• Non-discretionary spending unmovable – CHECK
• Federal budget as a percentage of the economy hasn't changed much (if at all) – CHECK

Seems like nothing's wrong to me. Oh, sure, the federal government spends a lot of money – money it doesn't have – on some stuff we don't need. But try taking away social security, Medicare, or defense. You'll be out of a job real fast if you're a national politician. Nobody has the wherewithal to do anything about any of this stuff.

So this is what I'd tell the Obama administration, if they asked: GROW the damned economy. Get it to 5-8 percent, and all this debt/deficit talk vanishes, people get hired for good jobs, and Obama gets a second term. It really is the economy, stupid, and Obama should have cracked this nut a while ago.

If I've said it once, I've said it a thousand times: The stimulus package was way too small.

And now that both sides of the aisle have either forgotten or dug in their heels on unemployment compensation extensions and further stimulatory legislation, we may be in for a classic double-dip recession.

Only this time, it might drive what seemed to be inevitable and then highly unlikely – a corporate lending and business real estate catastrophe that could dwarf the mortgage meltdown.

Then more cries, this time maybe real, for socialism will come to the forefront. Our brand of market capitalism (highly influenced by the idiots who represent us in Congress) certainly isn't working right now.

Economic Myth 2: The markets are panicking about the deficit

From Personal Finance News from Yahoo! Finance

 

To hear the G-20 tell it, the U.S. and other top countries had better slash those budget deficits before the world comes to an end.

And maybe the markets should be panicking about the deficits.

But they're not. It's that simple.

If they were, the interest rate on government bonds would be skyrocketing. That's what happens with risky debt: Lenders demand higher and higher interest payments to compensate them for the dangers.

But the rates on U.S. bonds have been plummeting recently. The yield on the 30-year Treasury bond is down to just 4%. By historic standards that's chickenfeed. Panicked? The bond markets are practically snoring.

They aren't seeing inflation either. On the contrary, they're saying it will average just 2.3% a year over the next three decades. That's the gap between the interest rates on inflation-protected Treasury bonds and the rates on the regular bonds. By any modern standard the forecast is low. Instead of worrying about inflation, some are starting to worry about something even more dangerous: deflation, or falling prices.

If that takes hold, cutting spending and raising taxes would be a bad move.

It's certainly possible the lenders buying these bonds are being foolish. And it's worth noting that the Treasury market is also subject to political distortions, because foreign are among the heavy buyers of bonds. So it's worth treating its apparent verdicts with some caution. Nonetheless, the burden of proof, as usual, is on those who argue the market is wrong.

It's the age-old "deficits are bad" baloney. Well, deficits can be bad. But in our case, they're not. We've been running deficits since the 40s, regularly. There was a time when we got close to eliminating the yearly difference between tax revenues and federal spending (late 90s very early 2000s), but Alan Greenspan warned that surpluses were bad.

Maybe he was right. The federal government certainly heeded his warning: We've spend trillions over the past 9 1/2 years, well above our "normal."

But most of that spending has come in terms of non-discretionary spending ("entitlements" that no politician has the courage to challenge, social security being one of the biggies, Medicare being the other horn of a really nasty bull) and very discretionary war spending.

Neither of which, I'll add, stimulates growth in the economy or jobs. Surely, soldiers have jobs, but they had those jobs before the economy tanked. What's going to happen if we every withdraw and don't need them any more? Will the government have the courage and discipline to "lay them off?"

I doubt it.

The problem is that, while we did put together a $787 billion stimulus package, it clearly wasn't enough. Yeah, you read that right.

They should have spent $2 trillion on boosting the economy from the get-go. But that's just my opinion. Prove me wrong

Economic Myth 1: Unemployment is below 10%

From Personal Finance News from Yahoo! Finance

What nonsense that is. The official jobless rate, at 9.7%, is a fiction and should be treated as such. It doesn't even count lots of unemployed people. The so-called "underemployment" or U-6 rate is an improvement: For example it counts discouraged job seekers, and those forced to work part-time because they can't get a full-time job.

That rate right now is 16.6%, just below its recent high and twice the level it was a few years ago.

And even that may not tell the full story. Many people have simply dropped out of the labor force statistics.

Consider, for example, the situation among men of prime working age. An analysis of data at the U.S. Labor Department shows that there are 79 million men in America between the ages of 25 and 65. And nearly 18 million of them, or 22%, are out of work completely. (The rate in the 1950s was less than 10%.) And that doesn't even count those who are working part-time because they can't get full-time work. Add those to the mix and about one in four men of prime working age lacks a full-time job.

Dean Baker, economist at the Center for Economic and Policy Research in Washington, D.C., says the numbers may be even worse than that. His research suggests a growing number of men, especially in deprived, urban and minority neighborhoods, have vanished from the statistical rolls altogether.

The verbiage above tells the right story. The official unemployment rate has always been a poor gauge of the employment picture. Only now, it's worse. I'll try to find data to back it up, but my gut tells me there are a lot of people underemployed (not working full time but who need or want to).

By "underemployed," I also mean that people aren't getting paid what they need to survive. Perhaps you lost your cushy 9 to 5 six-figure banking job and now you're working as a retail store manager (big pay cut there). You're working longer and harder but getting paid significantly less than you had been.

That's underemployed. Yes, you have a job and good for you! But you've certainly had to make some lifestyle changes, wouldn't you say?

A lot of personal finance bloggers would tell you that you should always live the frugal life; that's a great opinion to have and if you walk your talk, you're good to go. However, many people cannot live the way you do.

They are married and are the sole providers of their families. Or they have kids or parents to care for. Obligations that they may have acquired at a younger, less financially-aware age.

No matter. For the average man or woman on the street, having a job that fits their basic lifestyle needs is hard to come by right now. And I don't really see any relief on the horizon.

I will say, though, that lots of times the turn in the business cycle is unseen until it happens right in front of your eyes. That is to say, often times nobody sees it coming. Leading indicators are only so good. As they say, "hindsight is 20-10."

Let me know your thoughts in the comments.

Next up: Deficits are bad

unemployment, economy, economic myths, three economic myths

WASHINGTON (Reuters) – Housing starts fell to a five-month low in May but industrial output rose, evidence of an uneven recovery that has kept inflation at a minimum.

As the government’s tax incentives for homebuyers expired, new home building dropped 10 percent to a seasonally adjusted annual rate of 593,000 units, the lowest level since December, the Commerce Department said on Wednesday.

Home building plH – Yahoo! Finance

economy, housing, real estate, homebuyer tax credit

By Shah Gilani, Contributing Editor, Money Morning

Sooner or later, mounting losses on commercial real estate could crash through the market's 2009 optimism and send the economy and stocks into a double-dip downturn.

Accounting Gimmickry

Two weeks ago, a bipartisan group of 79 members from the U.S. House of Representatives sent a letter to U.S. Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben S. Bernanke. The lawmakers want the public to know that they are concerned that the "commercial-real-estate industry has the potential to infect our economy and slow a recovery," according to Rep. Paul E. Kanjorski, D-Pa.

When is a Bad Loan Not a Bad Loan?

The tooth fairy commeth. On Oct. 30, bank, thrift and credit-union regulators very quietly gave lenders flexibility in how they classify distressed commercial mortgages. Banks can now slice distressed loans into performing and non-performing loans, and institutions will magically be able to reduce the total reserves set aside for non-performing loans.

A Real Race Against Time

Lawmakers and regulators are desperately hoping that a strong economic rebound will stimulate job growth, consumption and demand for the commercial real estate that banks continue to hold.

But let's be real: There isn't enough time on any clock to ever win that race.

If we continue to chart this course, we're headed right for a double-dip downturn in the economy and in the stock market.

I'd like to say that I'm kidding, and that everything will work out just fine if we do nothing. But the reality is that only a comprehensive overhaul of banking regulations will save the U.S. economy and stock market from significant pain. Hiding behind accounting gimmickry is just another tarp being thrown over our problems by same special interests that got us into this mess in the first place.

One of my "must read" newsletters is written by John Mauldin and it's called – appropriately – John Mauldin's Weekly E-Letter. I get it each week in my inbox; I suggest you do the same.

I will caution you, however, that it may scare the pants off of you! Lately (the last few years), his commentary has been rather harsh. But, hey, look at the economy!

All that said, I encourage you to read this week's letter. One astonishing number came out this week: GDP growth of 5.7 percent! Yay, roll out the marching band and dancing monkeys, the recession is over!

But wait.

The Statistical Recovery Has Arrived

Before we get into the main discussion point, let me briefly comment on today's GDP numbers, which came in at an amazingly strong 5.7% growth rate. While that is stronger than I thought it would be (I said 4-5%), there are reasons to be cautious before we sound the "all clear" bell.

First, over 60% (3.7%) of the growth came from inventory rebuilding, as opposed to just 0.7% in the third quarter. If you examine the numbers, you find that inventories had dropped below sales, so a buildup was needed. Increasing inventories add to GDP, while, counterintuitively, sales from inventory decrease GDP. Businesses are just adjusting to the New Normal level of sales. I expect further inventory build-up in the next two quarters, although not at this level, and then we level off the latter half of the year.

Did you catch that? If not for the build up of inventory, our economy grew by only 2 percent. And we know these things ALWAYS revise DOWN.

Read the rest of the letter here. I think you'll learn a lot; I always do.

I saw on today's newspaper the big headline, "Mortgage Rates at All-Time Lows." Sheesh. Haven't we seen this TV show before?

Must we go down the same stupid road that got us here? I know, the credit standards are supposedly much higher now than they were in 2006-2007, where anybody with a pulse (and some even without) could get a loan for a piece of property. But I have heard random radio spots that hint that things really haven't changed much. Stuff like "no money down," "seller financing," and "no doc" loans…

I'm afraid we haven't learned a thing from our very recent past. I can't say I'm surprised.

The fundamentals of the market psychology hasn't changed: It still seeks short-term profits over long-term prosperity. Slow and steady hasn't kept the market happy for decades. It likes the hare, not the tortoise.

I also saw that gold hit $1200.

So how does one protect himself during these times? I'd suggest that you stick with the same old, same old:

• Stocks – still the best bet for long-term prosperity
• Cash – in case all hell breaks out
• Bonds – if interest rates ever go up again, they might become a little more enticing
• Gold – in case it gets worse than all hell breaking out
• Real Estate – your real inflation hedge

Depending on where you are in your life, you would do best to keep the bullk of your investable assets in stocks, some in cash, a little in bonds, very little in gold, and a bit in real estate. Note that I am not including your home in this assessment. If I did, most of us would have more than 50 percent of our assets in real estate (which might be a big part of the problem, right).

I still think the US is the place to be for innovation: IT, bio tech, medicine. But I think you may want to invest a considerable portion in foreign markets. China will not stop growing for some time. India is still going to improve. Latin America still has lots left, as does Canada, Russia, and Europe.

The world, as they say, is your oyster. Choose wisely, or else you may get one that's toxic.

A quartet of top U.S. bank stocks rose on Wednesday after J.P. Morgan Chase & Co. reported earnings that surpassed Wall Street estimates, and the insurance sector also weighed in with gains to lift financial stocks more than 2%.

I suggest that the management at JPM horde all that cash, as the next big mortgage resets occur in 2012 (5 years after the peak of 2007, when everybody and their mother, dog, parakeet, and gerbil bought houses with no money down, poor credit, and insufficient income).

Now that many of those same people are now either unemployed or still making less money than their mortgage payment, the pressure is going to be HUGE on the housing market, banking sector, and overall economy. Let’s hope the news that the economy and employment pictures are improving, else we fall into a really nasty tailspin. Let’s also hope I’m wrong about the resets (here’s the good personal news: my mortgage from 2004 reset at a lower interest rate).