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An Amazing Split View
Jan 29th, 2009 | 20 responses
The economic experts are almost unanimous. We have to pump up bank balance sheets with bailout money to save the economy. The general public is nearly as unanimous in thinking the best way to help a badly ailing economy is boosting the spending power of businesses and consumers.
So who is right?
The general public, of course. Banks make loans (with interest) to businesses and consumers. That’s what they do. They are merely enablers. If needed money came in some form from the government, there would be less need for the enablers to enable. The economy would start to grow again. Borrowers would also become more credit worthy. The banks would then begin to loan naturally.
This is obvious to almost everyone—except an economist or a Washington policy-maker.
20 Responses to “An Amazing Split View”
The economic experts are NOT almost unanimous – “…the libertarian Cato Institute plans to take out a full-page ad in The New York Times and The Washington Post on Thursday and Roll Call on Wednesday, making the case against stimulus. The ad will include the names of 250 economists across the country who oppose the massive spending and tax cut program that’s backed by President Barack Obama and many congressional leaders.”
250 economists is a lot.
As long as its local, stable banks and credit unions, who actually continue to loan to families and small businesses and not the behemoths that enabled so much of the house of cards financial schemes of the past 30 years, bubble, bust, bubble bust, bubble bust.
Look, last Fall's bailout was in the 100s of billions to rich people who screwed up. Everyone admitted it probably wasn't the right thing to do…we should let them fail, we should let them take the pain…but in the interest of “saving our economy” we shovelled out $$$ to the rich corporations that bit it.. mostly banks..
So, now that they took the money, partied down and hoarded it.. we have the same crises facing us. Many argue that the poor mortgage payers shouldn't get assistance, that they made the bed they're lying in. etc. etc. etc…you know…for wanting a roof over their heads.. So, we have the identical situation with the poor ostensibly “not deserving the money” as the rich “not deserving the money”…yet…who got the money?
That's right, the rich.. Again… As usual.
So, where should the next 100s of billions go? How about the other guys who got in over their heads and need a bailout? The ones who will use that help to consume…that's all they do anyway…consume… And in consuming en masse..as opposed to just a few rich folks hoarding as usual.. we will find the economy ACTUALLY stimulated back into life. The banks will find people staying in their homes…increasing their net worth on paper as land values slowly come to be stabilized…and consumers have more money to consume.
Throw the money at the rich again and you're going to get exactly what's coming to you..
Well said Silhouette. I agree completely with your take on this business.
I agree we should help out mortgage holders.
The rich hoard their cash? I'm not buying it. They invest it, probably more carefully than many of these financial firms.
And we didn't bail out rich corporations, we bailed out nearly-bankrupt ones. If they're now hoarding the cash rather than lending it, that's neither disastrous nor surprising. Give their investors a few months to catch their breath, and they'll start to get restless for a better return on that capital.
I don't know about your definition of “nearly bankrupt” but for me it means telling the kids we're eating beans and rice six nights a week and if we're lucky, chicken on Sunday. For the banks, “nearly bankrupt” means buying a $50 million corporate jet-toy.
Yes, the rich hoard their assets. They put them in Swiss bank accounts and spend lavishly abroad. Everything in their houses, estates and manors is “imported” don't you know.. No Americans quarrying italian marble I'm afraid..
Yes, they hoard and they turn their backs on those they feed off of…the labor of the poor when they are in their greatest hour of need. It really is like the coachman driving the poor horse and feeding it straw as he watches it get thinner and thinner. Like the horse, they'll just shoot us in the head, move to other countries, hire cheaper labor until those horses fall dead too.
Time to give the pony some grain. And if they don't…the pony just may kick its stall down with the last bit of strength it has and break into the silos.
Bear Stearns was “nearly bankrupt” on Thursday, March 13th in the sense that the next morning it would default on billions of dollars of payments against short-term loans. That would have sent their thousands of counterparties into pandemonium, including normally-stable money market accounts where you may have a little of your own cash sitting. Had the Fed not stepped in, the company would have been vaporized by Monday.
Putting your money in a Swiss bank account isn't hoarding it, it's giving it to the bank to lend out, perhaps to dodgy mortgage applicants. And spending it in Italy isn't hoarding it either, it's putting it back into the global economy.
Interesting analogy about the coachman and the horse, but I think you've got it the wrong way around. The top 1% of earners in the US already pay as much tax as the bottom 95%. At what point are the Robin Hoods of the left going to be satisfied the “rich” are doing enough to support their causes?
When there is no one in America going to bed hungry.
When there is no one in America dying for the lack of basic health care.
When there is no one in America unable to function in society due to a lack of education.
When there is no one in America getting sick and dying because of poisoned food.
When there is no one in America getting sick and dying breathing the air or eating the fish in our rivers.
When there is no one in America rotting in jail for having smoked a couple of joints or snorted a couple of lines of coke.
Pollyanna, aka Don Quijote, pray tell where in this world of ours does such Utopia exist?
And to be clear, your path to Utopia means Marxism/Socilism/Communism? (take all wealth from the wealthy, give it to others. If you have a better name for that process than I chose, share it)
So, what are the Marxist/Socialist/Communist states where:
When there is no one going to bed hungry.
When there is no one dying for the lack of basic health care.
When there is no one unable to function in society due to a lack of education.
When there is no one getting sick and dying because of poisoned food.
When there is no one getting sick and dying breathing the air or eating the fish in our rivers.
When there is no one rotting in jail for having smoked a couple of joints or snorted a couple of lines of coke.
You may want to look into Scandinavia…
I would, if there were such a country as Scandinavia.
There are Scandinavian countries (Denmark, Sweden, Norway, Finland, Iceland), some of which countries meet parts of your wish list, but none of which meet all. (there is no country in the world that can make the claim that there is absolutely no hunger there, or has not had a breakout of food-born illnesses with associated deaths, as examples)
How are the economies of those 5 doing these days? Iceland is a complete basket case, Finland is projecting a contraction in their economy in 2009 and a recession, Sweden is projecting higher unemployment and interest rates, and incidentally is planning tax cuts to boost its economy, Denmark is dealing with the Roskilde Bank collapse and is projecting an economic slowdown; only Norway maintains strong fundamentals at this time, mainly due to the liberalization of their market laws that allowed for huge growths in telecom and ship building.
Don, I don't know what your tax rate is, but the average one is 12.5%, so the Fortunate 400 are already well above that.
“How much is enough?” is a serious question. If you mean your answers seriously, what sort of world are you asking for? What will tax rates be on the top 1% and the top 10% (households making $108,904 or more)? About 5000 people die of food poisoning in the US every year; how low do you require that number to be, and how intrusive must the government become to accomplish that? Are you ready for a weekly federal inspection of your refrigerator?
It's also quite possible for anyone making median or above income in salary to invest more and shift more of their future income to capital gains income instead of salaried income- and then your income will be taxed the same way those Fortune 400 individuals are.
What's that, you don't want to risk your capital?
Oh, I see.
CStanley,
And those people just saw 1/2 of their investments disappear in the span of a few months, thanks to greedy bankers.
We should stop offering money to the banks. If they want our help, or are going out of business, they should accept nationalization. That way bank executives will try their hardest not to need help. And if they do, the taxpayers at least control the upside of any further intervention.
Then at some point in the future, we can re-privatize the banks.
Well, exactly, Chris. For all of the cries of inequity over capital gains being taxed at a lower rate, people like DQ ignore that the people getting taxed for capital gains take risks with huge amounts of money- the tax rate is low in order to incentivize that investment. He and anyone else is free to take the same risks and reap the same potential reward- or potential loss.
Yes, CStanley. Not only can they play in the capital markets, they did. Millions of people who apparently don't understand what “adjustable rate” means made large, highly leveraged capital investments and went down in flames, taking their “greedy bankers” with them.
What do you do about this situation? You can moan that the rich operate in a different world than the poor, where they've got more power and more opportunities, but the ugly truth is the poor aren't competent to handle more power and opportunities.
yeesh Dr_J. I am a free marketer, but it is the bigoted comments like that that just serve to give ammo to those who say the right is heartless.
Many, if not most, of those who took out ARMs knew what they meant. They were just betting on a rising housing market. And a lot of 'greedy bankers' pushed them long after it became apparent the house of cards was collapsing.
As to the poor not being competent to handle more power and opportunities, I don't even know where to start refuting that statement, it is so asinine. I will just go with there are a lot or rich that cannot handle the power and responsibility they have. Some poor deserve there station in life, no doubt, as do some rich. But for many, it truly is circumstance.
I have succeeded in my life, against the odds, overcoming drugs, lack of formal education, and other factors. I worked hard, eventually, but I got damn lucky, too. Not everyone does though.
Plus another 7.5% FICA, which kicks up the rate to 20%.
Latest peanut scare may be linked to previous outbreak
Inspecting the factories that produce our food would be a good start, particularly if they are in Jesusland.
But I didn't ask where you would *start* adding government to the mix, I asked where you'd stop.
If 5000 deaths per year is too many, we can spend more and get it down to 2000. Or 1000. Or whatever your appetite for regulation permits. But there will still be occasional stories of an outbreak of something somewhere. At what point will you be able to read such a story without calling for additional government spending?
I'm convinced this simple question represents 80% of the impasse between the left and the right in government. Conservatives can swallow taxation but don't want to write a blank check, while liberals either can't or won't define at what point they'll be satisfied that government is doing enough.
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