Great question...  You don't see the money being returned to the people directly in tax cuts.  The simplest stimulus plan would have been to reduce the payroll taxes by 50% for 2 years and to lower the percentages on the tax brackets.  Do this and put it in place for 2 years and you would have immediately injected money into the system via the people.  

But, the government doesn't trust the people.  In their eyes we aren't smart enough to do what needs to be done.  So, this money is being put into the system through government spending.  The government had gone a long way to nationalize the banking system.  They are talking about nationalizing the health care system.   And, look out energy -- let's just wait and see what happens here.  

But, you know what -- the banks and everyone else are doing exactly what they were afraid that we would do.  The government was afraid if they gave it to us, then we would pay down debt and save.  And, that is just want the banks are doing.  They are holding on to the money.  They have to.  As long as we see deflation, bank assets are worth less and less and they have to hold on to cash.  The reason for this isn't that the banks are cash-poor.  Actually they have a lot of cash.  But, they have assets that must be valued at their "current market value".  With prices going down, this means the bank's assets are worth less everyday.  It is an accounting problem more than a liquidity problem.

So, in my opinion, the problem is two fold -- 1) they don't trust the people to do what they want.  2) they want near total control of the economy.  Obama said in a speech the other day that he wants to put an end to the cycle of boom and bust.  Well, the only way that he can absolutely prevent bubbles from forming and the natural corrections that follows is to take complete control of the financial system.

They are behaving like politicians... The bonuses were awful and it highlighted the government's incompetence. So, they revert back to their fundamental principles -- do something popular and divert blame instead of doing something smart.

We (the American people) own 80% of AIG. It'd be great if the people in control (congress/administration) started treating this like an investment. After all - it's our money. Whether we like it or not - it's our company.

Not only is the 90% tax frightening and unconstitutional, but the result will be people leaving AIG because they are afraid for their lives, their families well being and employment contracts are meaningless. Now one might argue that "these evil people need to go". But, who is going to take their place? Any upside for new people would be taxed at 90% and you could argue that taking a job at AIG would be a career killer. So, I don't see the best and the brightest knocking down the doors to get into AIG?

So - I don't know if their goal is specifically to bankrupt America and all of the people. But, it appears that they are going to destroy what's left of AIG and flush our money along with it. And, through their incompetence they may indeed bankrupt us all.

Bashi - I hear a lot of insults thrown around. But, how about explaining how this is going to work?

We are in a recession. We are experiencing deflation. We are pumping money into the system at a rate never seen before. Just yesterday the fed announced they were putting another $1T into the system. This should scare everyone to death. It is a last ditch effort to turn things around - interest rates are as low as they can go. And, this is the last thing that the fed can try.

To me this means -
- The recession lasts another 1-2 years. Who is going to start hiring? Who will spend money? Who has confidence in the market? How does it not continue for another year or two?
- Once we do start to recover, all this money that we have borrowed and printed will flood the market and lead to hyper-inflation. How can you triple the money supply without devaluing the dollar and causing inflation?
- The inflation will drive us into yet again another recession.

This is pretty simple economics. And, this is a best case scenario.

Can you explain the economics of how this will work? Or, will you just call me insane.