Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
In the 1930s, the problem wasn't that there wasn't enough food, but that the government was paying farmers not to grow crops and destroy food.
In the 1940s, the US middle class lent the government the equivalent of trillions by buying war bonds. How did the a middle class, who had been in an economic depression for over a decade, afford to lend the government the equivalent of trillions of dollars? It's because they had savings.
After 1929 and for a long time after that, few in the middle class would be dabbling in the stock market!
The big thing about War Bonds was demand/inflation control. They took all that money from being potential sales into savings. They were zero coupon and paid out the interest at redemption time. @ 1.5 - 3%.
Ideally this stimulus would substitute for a paycheck for one who is of lean means. So not only would that person benefit, but so would the seller of the goods or services they buy as a result. If there is an excess of these goods and services, then the benefit goes farther up the economic chain.
That's fine. In one case. Country has major proficit and absolutely major equity stashed in some tangible manner. Sort of, saving account for "just in case". Also, country actually OWNS its own money (everyone reaches into their billfolds, pulls dollar bill out and Reads "Federal Reserve Note'. Not say United States Treasury Note)
Such country, in case of emergency, dips into that stash - as that's what it is for - and shares it, as one time non taxable non returnable donation to those, who are in real need.
Zimbabwe might, as well, be in better position for this, than the US, drowning in debt since who knows when. You have to be malignant to cure debt with debt.
Otherwise, you are using candy wrappers that have no real value, as gasoline, to pour onto fire to extinguish it.
If you REALLY want to create purchasing power, there is a peculiar way of doing this. Forfeit ALL household debt.
Currency creation doesn't lead to inflation. Currency creation is inflation. Rising prices is not inflation, but rather a byproduct of inflation.
There is a diminishing supply of many goods, due to decreased production from the pestilence. Less supplies and more currency paves the way for higher prices. Haven't you heard of the complaints of "price gouging?" That's simply inflation in action.
And when price inflation really starts to rampage out of control, there won't be anything anyone will be able to do to stop it.
This is not necessarily true.
Now if you mean large scale currency creation placed directly into circulation in an economy, then most likely.
Like right now this is the reason for stimulus. To avoid deflation, the worst of scenarios, we are trying to inflate a bit.
But if that newly created currency is not placed into circulation as for instance with QE post 2008, there will be little if any inflation.
Or if that money goes overseas and throughout the world, we would see little if any inflation here.
IMO we will see some measurable demand related inflation coming out of our viral situation. Some price inflation if those producers crump before we open back up.
But by and large our goods of necessity and those demand are and will be met, and IMO we will recover our economy and more, medium term.
Mortgages and consumer debt are packaged and sold as bonds to public sector pension funds, private sector pension funds, exchange-traded funds (ETFs) that are in 401K plans, ETFs in IRAs, and to individual investors.
At that point, the bank no longer owns the debt. At that point, the bank is merely a servicer: they collect mortgage payments and car payments and forward the money to the owners of the debt.
A furlough on mortgage payments and on debt payment cascades through the system. Are retired public sector employees willing to have their pension payments reduced because homeowners don't pay their mortgages? Are currently working public sector employees willing to have their future pensions reduced so that today's homeowners and car owners don't have to pay their mortgages and car payments?
That is exactly what I typed.
Quote:
Originally Posted by Free-R
This would be the solution and it wouldn't cost a thing. The only real issue in not making payments is a hit to credit and all of the related agreements surrounding the penalties in not paying; the bankruptcy rules and rights that debtholders have and all of that. The problem is that so much debt is packaged into investment products and it is all related and intertwined on a systemic basis, so if that goes on too long, or too much,, it creates a domino effect of destruction.
So the stimulus keeps the payments uninterrupted and the current system intact, in theory. In practice it is going to be a lot more messy.
My point was that if everything was 1:1, lender to borrower, it would work at little to no cost. But that's not how the system works as many loans are packaged off to hundreds if not thousands of investors. So it won't work. That is why I said they're needing to do stimulus rather than a moratorium on debt across the board.
Currency creation doesn't lead to inflation. Currency creation is inflation. Rising prices is not inflation, but rather a byproduct of inflation.
There is a diminishing supply of many goods, due to decreased production from the pestilence. Less supplies and more currency paves the way for higher prices. Haven't you heard of the complaints of "price gouging?" That's simply inflation in action.
And when price inflation really starts to rampage out of control, there won't be anything anyone will be able to do to stop it.
Your first claim above is simply false. You are ignoring demand. If an economy has $100 in money supply X velocity of money derived from Y demand and Z prices and assume whatever number of transactions greater than 0..........and then the money supply is increased to $200 but the other bits stay the same there will be no inflation. If the money supply is increased to $200 but demand falls via fewer transactions etc. etc. the economy faces deflation.
The idea what we are facing general price inflation right now is absurd, demonstrating a near total lack of contextual understanding.
This would be the solution and it wouldn't cost a thing. The only real issue in not making payments is a hit to credit and all of the related agreements surrounding the penalties in not paying; the bankruptcy rules and rights that debtholders have and all of that. The problem is that so much debt is packaged into investment products and it is all related and intertwined on a systemic basis, so if that goes on too long, or too much,, it creates a domino affect of destruction.
So the stimulus keeps the payments uninterrupted and the current system intact, in theory. In practice it is going to be a lot more messy.
or the govt can mandate the credit reporting agencies take into account extenuating circumstances. In the article I posted, some banks already waiving fees and penalties.
Quote:
Originally Posted by RationalExpectations
Mortgages and consumer debt are packaged and sold as bonds to public sector pension funds, private sector pension funds, exchange-traded funds (ETFs) that are in 401K plans, ETFs in IRAs, and to individual investors.
At that point, the bank no longer owns the debt. At that point, the bank is merely a servicer: they collect mortgage payments and car payments and forward the money to the owners of the debt.
A furlough on mortgage payments and on debt payment cascades through the system. Are retired public sector employees willing to have their pension payments reduced because homeowners don't pay their mortgages? Are currently working public sector employees willing to have their future pensions reduced so that today's homeowners and car owners don't have to pay their mortgages and car payments?
Everyone else has their revenue streams cut though. If large portion of population gets cascaded by the lockdown, I dont see why another portion should be protected more. Plus the mortgages and consumer debts are pooled together. It is the fund, or institution that is guaranteeing retirees not the individual mortgagees/debtor. Certainly, there is enough in the pool to last for a bit until everything picks back up. Once economy picks back up, should be like stock market. It grows bigger than ever has been previous years.
My point was that if everything was 1:1, lender to borrower, it would work at little to no cost. But that's not how the system works as many loans are packaged off to hundreds if not thousands of investors. So it won't work. That is why I said they're needing to do stimulus rather than a moratorium on debt across the board.
The fact that it is all pooled together makes it robust enough to withstand moratoriums. Imagine if each mortgagor has one retiree whom money is owed, and that is only revenue stream for retiree. Pooling together is similar to how a banks takes your money but loans out way more than they have, and yet still enable you to draw cash.
The stimulus is largely a reallocation of existing wealth from those who have a lot of it to those who have much less of it (or are negative) in a multi-temporal model. Adding digits to your bank account today will be paid by me and other VHNWI & UHNWI tomorrow in the form of extraordinary tax increases.
The stimulus is largely a reallocation of existing wealth from those who have a lot of it to those who have much less of it (or are negative) in a multi-temporal model. Adding digits to your bank account today will be paid by me and other VHNWI & UHNWI tomorrow in the form of extraordinary tax increases.
I pay less taxes today than during the Reagan era. When do you see federal taxes rising to pay off national debt?
It is a slow day in the small Saskatchewan town of Pumphandle, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Co-op.
The guy at the Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her services on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves. No one produced anything. No one earned anything... However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And the only way that things continue for the people above is more borrowing. Just like in America.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
