If the bailout isn't passed, unemployment might be in the double digits. (borrow, mortgages)

[Icy Tea]

This bailout is going to cause double digit unemployment and compound it with runaway inflation. The stock market took this stimulus passing like it was POISON. And Geithner is terrible. He is so shifty eyed I really had to wonder if he was saying anything that wasn't a pack of lies.

[chuck22b]

Originally Posted by gwynedd1

In this system the solution is simple. Simply replace the contracting private credit with public credit. To do this with without wealth transfer or central planning simply cut taxes which will grow public debt(the money) to counter the shrinking public credit. If inflation returns , raise taxes. Most of all, we need to replace federal reserve notes with treasury notes and stop calling it debt. Its our money. Then we need to go to full reserve banking and not allow the money supply to grow with debt.

Thanks gwynedd1, and I agree with you that it's primarily a money problem. Public debt has to increase to compensate for the drastic reduction in private debt from defaults. The tricky part is HOW, to transfer the private debt into public debt.

Tax cuts will only benefit those that are working. Giving money/debt through food stamps, unemployment, etc would transfer debt from the poor to the public. What is equitable and fair... who knows - that's a political response.

The economists and advisers to the current administration are doing what your prescribing (transferring private debt to public debt through spending and tax cuts) so I don't think they are totally unaware of the problem. As far as becoming a full reserve system.... if things get really bad... I'm hearing the possibility of nationalizing the banks.

-chuck22b

[gwynedd1]

Originally Posted by chuck22b

Thanks gwynedd1, and I agree with you that it's primarily a money problem. Public debt has to increase to compensate for the drastic reduction in private debt from defaults. The tricky part is HOW, to transfer the private debt into public debt.

Tax cuts will only benefit those that are working. Giving money/debt through food stamps, unemployment, etc would transfer debt from the poor to the public. What is equitable and fair... who knows - that's a political response.

Hi chuck22b,

I would not be opposed to direct stimulus to the unemployed as well. The increase in money supply would also tend to create employment.

The economists and advisers to the current administration are doing what your prescribing (transferring private debt to public debt through spending and tax cuts) so I don't think they are totally unaware of the problem. As far as becoming a full reserve system.... if things get really bad... I'm hearing the possibility of nationalizing the banks.

-chuck22b

The problem is the direct stimulus is about 250 billion and the bank bailout is now looking to be 2 trillion. If the money supply increases at an 8 to 1 ratio its a real wealth transfer to banks. There is no need to steal with inflation but simply by inequitable reflation which is what we are seeing. What we are looking at is cheap credit for those with good credit which will again cause finance engineered ownership crowding out equity ownership. So all they appear to be trying to reignite is a good credit buying spree at best. As deflation takes hold real debt and its burden is increasing so this cohort is shrinking. The question is, is more food available at 500 seats at $2 a plate or 50 seats at $1 a plate?
The only effective measure is direct stimulus in the neighborhood of $5000 per house hold to start. Their free fish fry to anyone who can swim out to the financial island cannot work.

[chuck22b]

Originally Posted by gwynedd1

Hi chuck22b,

I would not be opposed to direct stimulus to the unemployed as well. The increase in money supply would also tend to create employment.




The problem is the direct stimulus is about 250 billion and the bank bailout is now looking to be 2 trillion. If the money supply increases at an 8 to 1 ratio its a real wealth transfer to banks. There is no need to steal with inflation but simply by inequitable reflation which is what we are seeing. What we are looking at is cheap credit for those with good credit which will again cause finance engineered ownership crowding out equity ownership. So all they appear to be trying to reignite is a good credit buying spree at best. As deflation takes hold real debt and its burden is increasing so this cohort is shrinking. The question is, is more food available at 500 seats at $2 a plate or 50 seats at $1 a plate?
The only effective measure is direct stimulus in the neighborhood of $5000 per house hold to start. Their free fish fry to anyone who can swim out to the financial island cannot work.

I agree... and politics is the issue at hand as to where they direct re-inflation. Sadly... guess who has the most influence over politics?

If you haven't guessed, I'm pro stimulus. As far as how it's going to be applied... there has to be a mixture of both tax cuts AND spending.

IMO, the people that are against the stimulus are fearful that the debt incurred (re-inflation) will diminish the value of their savings and assets. The current trend essentially favors those with good credit/savings with stronger buying power and cheaper cost of credit.... while penalizing those with poor credit or debt loads with higher costs of holding debt. The thing that they're forgetting is that, the pool of people with "good" credit is shrinking as unemployment rises along with the larger trend of re-inflation of the wealth towards the upper echelons.

Of course, if your in the upper echelons... things are just dandy

-chuck22b

[tired-of-mn]

Gwyn could you explain your post about debt is a money problem in simpler terms. Im afraid I dont have a firm grasp of economics, sorry.

[gwynedd1]

Originally Posted by tired-of-mn

Gwyn could you explain your post about debt is a money problem in simpler terms. Im afraid I dont have a firm grasp of economics, sorry.

Hi tired-of-mn,

Sure thing. What we use as money is essentially originated as debt. That is the value behind it. If I owed someone a cup of coffee to a friend and I gave him an IOU this could be passed around as an IOU among mutual friends. Its a debt backed piece of paper. It is government debt that backs federal reserve notes. Who ever the government owes has an asset.
However these notes do not go directly to people. They are loaned to the public as fractional reserves which is really nothing more than creating money. Thus all money in circulation to people is created at a debt to a bank which someone pays interest on. However it is not the bank that holds this value but the taxing power of the US that creates this value. We allow banks to lend value that do not actually create.

[Icy Tea]

Instead of a stimulus we need a "taxuless."

[Bideshi]

"If the bailout isn't passed, unemployment might be in the double digits. "

Or if it is passed. It makes no difference.

[killer2021]

Originally Posted by Bideshi

"If the bailout isn't passed, unemployment might be in the double digits. "

Or if it is passed. It makes no difference.

Like the last 800 billion?

[sterlinggirl]

Originally Posted by killer2021

Like the last 800 billion?

I read somewhere today that we owe China a little over 600 Billion....

Maybe this is just a crazy thought, but wouldn't it be better to spend the current 800 Billion to just pay off the Chinese?