$1-$2T+ Stimulus/Bailout/Slush Fund Package - Printable Version
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RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - magnus - 03-27-2020
(03-27-2020, 02:08 PM)chrisk Wrote: (Social Distancing not practiced at signing ceremony, such a large group squished into camera range).
Recipe for disaster. =(
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - burger - 03-27-2020
(03-27-2020, 02:25 PM)magnus Wrote:Too late? A White House correspondent for Yahoo News was diagnosed with the virus this week. IIRC, he attended 4 WH briefings this month, the latest on the 18th.(03-27-2020, 02:08 PM)chrisk Wrote: (Social Distancing not practiced at signing ceremony, such a large group squished into camera range).
Recipe for disaster. =(
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - 2006alum - 03-27-2020
Going to the larger question of the government offsetting corporate liabilities, I thought this op-ed was quite illuminating, especially this observation:
Quote:In the wake of that crisis, governments themselves have become highly indebted, requiring virtually continuous support from central banks to acquire that debt to maintain low interest rates to support growth. The average ratio of government debt to GDP for G-7 economies reached 117% in 2019, up from 81% in 2007. Any attempt to taper or reverse the accumulation of government debt or other assets is quickly reversed as financial markets become unruly and economies slow.
Now faced with the exogenous shock of the COVID-19 pandemic, policymakers are returning to the same tools employed in the financial crisis a decade ago. They are desperately searching for programs that will fill the demand gap created by massive shutdowns and travel restrictions while simultaneously finding ways to prop up businesses that to a large degree are overly indebted as a result of artificially low interest rates from the past decade.
The ultimate policy goal is to stabilize the economy by salvaging industries that will need to provide employment when the pandemic ends. Given the high level of leverage in these companies, any gaps in cashflow will make it impossible for many companies to service their debt. The total debt of U.S. non-financial businesses has grown by about $6 trillion since 2007, while cash on hand has only grown by $1.7 trillion. A big driver of that debt growth has been buying back stock.
Lending these companies more money will only compound the long run problem resulting from over-leverage and make the companies even more vulnerable to failure in the long run.
We are experiencing the end game of the great debt super cycle. As the private sector has become increasingly over-levered, the baton is being passed to the public sector where resources are so strained that the printing press has become the last resort. At 4.6% of GDP, the U.S. federal budget deficit in FY 2019 was larger than anything we’ve seen outside of a recession or war.
The truth is that the only policy solution short of socialism is to accomplish a great transfer of wealth from investors to debtors.
The author goes on to suggest that debasement is the most viable way out. I'm not 100% sure I agree with his proposed remedy, but his diagnosis is pretty sobering, and sooner or letter a reckoning is coming due.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - chrisk - 03-27-2020
(03-27-2020, 02:30 PM)2006alum Wrote: Going to the larger question of the government offsetting corporate liabilities, I thought this op-ed was quite illuminating, especially this observation:
Quote:In the wake of that crisis, governments themselves have become highly indebted, requiring virtually continuous support from central banks to acquire that debt to maintain low interest rates to support growth. The average ratio of government debt to GDP for G-7 economies reached 117% in 2019, up from 81% in 2007. Any attempt to taper or reverse the accumulation of government debt or other assets is quickly reversed as financial markets become unruly and economies slow.
Now faced with the exogenous shock of the COVID-19 pandemic, policymakers are returning to the same tools employed in the financial crisis a decade ago. They are desperately searching for programs that will fill the demand gap created by massive shutdowns and travel restrictions while simultaneously finding ways to prop up businesses that to a large degree are overly indebted as a result of artificially low interest rates from the past decade.
The ultimate policy goal is to stabilize the economy by salvaging industries that will need to provide employment when the pandemic ends. Given the high level of leverage in these companies, any gaps in cashflow will make it impossible for many companies to service their debt. The total debt of U.S. non-financial businesses has grown by about $6 trillion since 2007, while cash on hand has only grown by $1.7 trillion. A big driver of that debt growth has been buying back stock.
Lending these companies more money will only compound the long run problem resulting from over-leverage and make the companies even more vulnerable to failure in the long run.
We are experiencing the end game of the great debt super cycle. As the private sector has become increasingly over-levered, the baton is being passed to the public sector where resources are so strained that the printing press has become the last resort. At 4.6% of GDP, the U.S. federal budget deficit in FY 2019 was larger than anything we’ve seen outside of a recession or war.
The truth is that the only policy solution short of socialism is to accomplish a great transfer of wealth from investors to debtors.
The author goes on to suggest that debasement is the most viable way out. I'm not 100% sure I agree with his proposed remedy, but his diagnosis is pretty sobering, and sooner or letter a reckoning is coming due.
The real question is how the debasement hits the middle class vs the wealthy. The wealthy usually seem to come out OK. It is interesting to note that post Depression and WWII was a time when inequality was less extreme.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - OutsiderFan - 03-27-2020
I HATE this being called a stimulus. It’s a massive rescue and should be called as much.
I had a lengthy discussion with a friend yesterday on the topic of debt, financial markets, and taxes. We basically concluded that central banks will always do whatever is necessary to save the system. He observed that if central banks will always print money to buy government debt, why the hell should we pay taxes? They de-value our currency holdings as it is, so why should we let them take our money also?
We both concluded over the long haul it’s best to buy an S&P 500 index fund because the same dynamics that drive bailouts also will make the stock market go up over time. There is an imperative to make sure the market goes up over time, so it always will.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - BostonCard - 03-27-2020
(03-27-2020, 07:58 PM)OutsiderFan Wrote: I had a lengthy discussion with a friend yesterday on the topic of debt, financial markets, and taxes. We basically concluded that central banks will always do whatever is necessary to save the system. He observed that if central banks will always print money to buy government debt, why the hell should we pay taxes? They de-value our currency holdings as it is, so why should we let them take our money also
Sounds like you guys discovered modern monetary theory.
And the answer is that the trick works as long as prices are stable. But it stops working as soon as inflation kicks up, because if central banks print ever increasing amounts of money to fund a government whose costs are ever increasing due to inflation, you get an unbreakable cycle and a collapse in confidence that prices will be stable.
BC
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - stupac2 - 03-27-2020
And in case you're wondering about the case against MMT, here's Krugman's take: https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wonkish.html
But yes, there's a reason I've been repeatedly saying that congress should authorize the fed to send money directly to citizens for as long as it takes. There's no downside to anyone except inflation, which was too low anyway before this hit, and is probably only going to go lower and lower. May as well send the money to people directly instead of trying to trickle it down via lower taxes or discretionary spending, etc.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - OutsiderFan - 03-27-2020
(03-27-2020, 08:34 PM)stupac2 Wrote: And in case you're wondering about the case against MMT, here's Krugman's take: https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wonkish.html
But yes, there's a reason I've been repeatedly saying that congress should authorize the fed to send money directly to citizens for as long as it takes. There's no downside to anyone except inflation, which was too low anyway before this hit, and is probably only going to go lower and lower. May as well send the money to people directly instead of trying to trickle it down via lower taxes or discretionary spending, etc.
What’s funny is the Fed chairman said the Fed isn’t authorized to send money directly to Americans. I’m like, are you kidding me? We’ve broke and re-written so many rules and norms we used to have, why the hell not just make up a rule to do this?
Not to get too far afield here, but I was talking to a guy today about the pain in ass it is to submit proposals for government RFPs. He told me there is now AI to do this. I said, oh great, another entire job class being eliminated. My point is this is the kind of stuff that moves us close to needing a UBI, and the Fed May want to really get serious about developing the capacity to give money directly to Americans. It makes more sense to give the money to citizens than it does to buy bonds that create a debt obligation for tax payers.
Then again, Hamilton (IIRC), thought debt would always yield an asset or activity that balanced the debt. Like, for every $1 of debt you create, there is $1 of value created. So the reality is even though we don’t have a balance sheet that tracks the asset developed in exchange for a liability that we track, effectively, this is what is going on and we could put such a balance sheet together if we had the information to do so.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - BostonCard - 03-27-2020
If you are worried about unemployment, you could always hire people to dig holes and then fill them.
BC
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - 82 Card - 03-27-2020
(03-27-2020, 10:34 AM)BostonCard Wrote: The House passed the bill by a voice vote, which means that despite all the drama, no congressional member in either the house or the senate voted against it.
https://apple.news/Apwjj29wiTgSud1cZVgZfuA
BC
It wasn't unanimous in house. There was an audible "no". However motion for recorded motion failed because it did not have sufficient support when supporters were asked to stand.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - 82 Card - 03-27-2020
(03-27-2020, 09:27 PM)OutsiderFan Wrote: Not to get too far afield here, but I was talking to a guy today about the pain in ass it is to submit proposals for government RFPs.
If you do mess with those, don't skip the part about Chinese parts. It's scheduled to get more expansive in August.
RE: $1-$2T+ Stimulus/Bailout/Slush Fund Package - BostonCard - 03-28-2020
(03-27-2020, 10:45 PM)82 Card Wrote:(03-27-2020, 10:34 AM)BostonCard Wrote: The House passed the bill by a voice vote, which means that despite all the drama, no congressional member in either the house or the senate voted against it.
https://apple.news/Apwjj29wiTgSud1cZVgZfuA
BC
It wasn't unanimous in house. There was an audible "no". However motion for recorded motion failed because it did not have sufficient support when supporters were asked to stand.
You are right. I believe it was Massie who voted no, along with bringing a motion to require a recorded vote.
BC