Throwing Money At Our Problem

So I’m sure everybody’s aware of the second economic stimulus package that is going through Congress.

Suppose it doesn’t work. What options will we have left?

I’m not really worried about the U.S. too much, seeing as how we hold the big guns. Even without money, we’ll still be the leading superpower due to our military (let me know if you think otherwise!).

It seems everything is riding on this economic stimulus package, it seems it’s our last resort. Your thoughts?

Nationalising some banks.

That may at least recoup some of our money before they all spend it on redecorating the execs’ offices.

That pretty much seems to be the consensus this side of the pond, Faust - nationalise the banks and you can then basically get them to do what you like.

I know of a local bank that has 200 million dollars to lend, but lending criteria so onerous that they won’t lend it. Since they are paying a vig, they will have to loosen their standards, but when? They want to lend it to professional capitlaists with great track records. But lending it dorectly to consumers, some of it, anyway, would help more, and faster.

They are drowning, even as they swim right next to the shore.

If it does not work you are going to see a run on the money… Things will get bad in a hurry, and then the problem will not be jobs, but how to get food out of the farmers, because they don’t need us near as much as we need them…Actually, the corporate farms are enough to hold us hostage to our bellies…Those jokers who think the thing will get better on its own ought to be thrown to the dogs… I hope they have their way…As a revlutionary I want it all to go down in flames… But the sight of half the crew pumping the bilge and the rest standing on the hose is a sight for the books… It ought to sink…It is a ship of fools…

Uh… OK.
So, flesh out this suggestion a bit: Who is going to operate these nationalized banks and what makes you think they will do anything different???

Did you ever consider the possibility that it is not really a macro-economic stimulus package at all?

Consider the possibility that it is simply a subsidization of rich crony capitalists and the general public is being told a bullshit story.

jugger - that’s a bit dramatic, I think.

Sam - the Treasury Department. We gave them all that money to make the credit market more liquid. They haven’t done that. But Treasury has to do what Obama tells them.

Nationalize ALL of the banks.

and the car companies,

and the gas companies,

and the gas retailers,

and the major grocers,

and…

Faust,
For a moment there you almost got me. I honestly thought you were serious.

I am serious. I am not advocating that at this time. But the question was “what else could we do?”.

If we, the taxpayers, lend banks money, and expect a return, we have, in effect, sold a bond. Why should we not buy a stock, instead?

The other thing we can do is to let a few of these banks fail. Before we give them more money.

In that case…

… the solution is simple! Obama should just tell everybody in the world to hold hands and sing Kumbaya!

It might take more than that.

Another thing we can do is to wait. Wait for the housing market to bottom out, which it will do at different times in different places, and wait for banks to grow some balls back. And then we can start the whole cycle again.

Now, you are finally talking sense.

The truth of the matter is that governments can not create something out of nothing. Government interventions – either spending or printing money – only delay market corrections. Waiting and doing nothing is actually the best thing because market agents are forced to make sacrifices.

Stimulus only delays the inevitable by subsidizing malinvestments. Rising out of a recession will happen naturally in spite of government actions. It is foolhardy to associate government “stimulus” as helping an economy to get out of a recession.

Hear me, Hear me,

For I present the solution:

The first thing that you have to do is give the people, not the banks, an opt-out and quit indiscriminately throwing money to whatever bank asks for it, there must be a system.

The system must exist also to increase the average individual’s disposable income to maintain a consistent level of spending, which will further keep people that still have their jobs, well, having their jobs.

This can be accomplished in a very simple way by simultaneously bailing out both the banks as well as the individual tax-payers. PavlovianModel146’s Credit Card and Auto Loan Forgiveness Plan.

This is how PavlovianModel146’s Credit Card and Auto Loan Forgiveness Plan works:

Let us compute Credit Cards in simple terms, let us say that a person makes $3,000 in purchases on a Credit Card while making the standard minimum payment (2% of the outstanding balance) while they have a Purchase APR of 18% flat, here is what you will have:


Balance $3000

Now, we will subtract 2% (the minimum payment) after adding 1.5% (18% APR divided by 12) and we will do this for two years, let’s say:

(All one-hundredth decimal places round up at 5 or above)

Month 1:

Balance $3000 + 1.5% = x
x = $3045

Payment $3,045 * .02 (2 Percent) =x
Payment (x) =$60.90

New Balance: $2984.10

Bank: $60.90

MONTH 2:

$2984.1 + 1.5% = x

x= $3028.86

$3028.86 * .02 = x

x= 60.58

Bank: $121.48

MONTH 3:

$2968.28 + 1.5% = x
x = $3012.80

$3012.80 * 2% = x
x = 60.26

Bank: $181.74

MONTH 4:

$2952.54 + 1.5% = x
x = $2996.82

$2996.82 * 2% = x

x= $59.94

Bank: $241.68

Now, as you can clearly see at this point the amount of a minimum payment is going to be $0.32 less than whatever it was the month prior, keeping with this (and this may change by maybe a penny a month at some point) we will now simplify the procedure and determine where we are after 24 months:

Payments made after 4 months: $241.68

Month 5: $59.62
Month 6: $59.30
Month 7: $58.98
Month 8: $58.66
Month 9: $58.34
Month 10: $58.02
Month 11: $57.70
Month 12: $57.38
Month 13: $57.06
Month 14: $56.74
Month 15: $56.42
Month 16: $56.10
Month 17: $55.78
Month 18: $55.46
Month 19: $55.14
Month 20: $54.82
Month 21: $54.50
Month 22: $54.28
Month 23: $53.96
Month 24: $53.64

After 24 months, the bank has received: $1373.58

Please note also that the balance at the beginning of the month (before interest and payment) and the balance at the end of the month (after interest and payment) usually reflects a difference of around $16, but as the balance drops, the difference between the beginning and end of the month will also drop, but let’s just use $16 because it is a nice round figure.

x = $3000 - (24 * 16)

x = $3000 - 384

x = $2616

So, as you can see the bank has received over two years $1373.58 off of $3000 in purchases, but you still owe the bank $2616. If you were to pay the bank all at once:

x represents bank’s net profit:

x = $2616 + $1373.58 - $3000

x = 3989.58 - $3000

x= 989.58

So, the bank has essentially taken a three thousand dollar investment and increased that investment by 33% almost in the last two years.


What we are going to have now is an option for individuals that will simultaneously help the banks obtain a capital infusion, educate the average consumer about credit and increase an individual’s disposable income.

If an individual chooses to do so, he/she can file with the government for complete and total relief of credit card debt, student loans, or auto loans (yes, there will be a repossession on the auto-loan):

If an individual chooses to do it with a credit card, the bank will then be paid by the government the entire amount of whatever that individual’s balance is to the bank with whom they have the card. This is not bankruptcy so the individual is in no danger of losing their home, the individual, however, may not apply for or obtain any unsecured line of credit for ten years.

If an individual chooses to do it with a student loan, that individual must also do it with their credit cards and the same rules apply. If an individual has no credit cards, then that individual still may not have an unsecured line of credit for ten years.

If an individual chooses to do it with an auto loan, the car is repossessed, but by the government. The government will pay the bank whatever amount is owned on the loan, and the car will be sold in government auction. When the car is sold in government auction, the individual will get 1/2 of the amount that the auto is sold for in tax-free cash. The downside is that the individual may not purchase an auto for five years for which the individual requires a secure line of credit.

It solves:

Banks and Bad Loans: The only bad loans that this plan does not take care of are home loans. However, with the additional capital influx coming quickly over the course of five or less years it will give the banks the opportunity to look at the loans that may go into foreclosure and perhaps re-negotiate a new thirty-year mortgage on whatever is owned on the home. Another potential option would be payment deferment where an individual would pay only the interest until such a time that they are able to begin paying on the principal again. (Probably 12-18 months maximum on the deferment) The bank would be justified in increasing the interest on the deferment and will make up the lost short-term capital on the principal on the back-end.

Not only that, but getting paid the interest is better than getting paid nothing.

Disposable Income: The individuals that were struggling to get by that take advantage of any of these programs will find that they have a significant increase in disposable income. As a result, they will begin doing home improvements, going to restaurants, shopping for clothes and passing money around with other people in general. This is especially true for the people with the autos because they can use the money (half of the auction price) to pay cash for an older vehicle and a car loan is often third to the mortgage and gas/electric for the highest bill in the household.

Employment: More disposable income, more retained employees, I don’t feel the need to explain this.

As it is now, all of the banks are going completely in the other direction and are being extremely stingy in their lending practices. The majority of the money being pumped into the banks is not assisting the general economy because the general economy doesn’t see it. Then you have your assholes like CitiGroup who were recently considering the purchase of a new 50 million dollar luxury jet, how many people did the announce they would lay off last week, by the way?

Agreed, sammy.

A quick note on today’s vote on the stimulus package in the house.
Not one single GOP member voted for the stimulus package.
Which leads us as to why? Not enough tax cuts they say.
TAX CUTS. Are these people serious. A huge part of why we are in this
mess is their huge tax breaks during bush’s regime. Of course they
have no clue as to the fact that tax cuts don’t work and have never worked.
There is no instance of national tax cuts ever working to stimulating an economy.
The 4 instances of national tax cuts failed to do anything for the economy.
(Bonus points if you can name the 4 times)
And the one time taxes were raised the economy boomed as few others
have, 1993. The GOP needs to be renamed the “Herbert Hoover” party.

Kropotkin

PeterK,
I am going to let you in on a little secret which may help you become a useful socialist as opposed to just a confused reactionary. It is the rich people who print the money that the poor people are forced to use. Meditate upon that.

Socialists can demand taxing the rich all they want until they are blue in the face but it will never make a difference because the rich people will continue to print new money and give it to their rich friends first.

What has happened is that the wealth has been sucked out of our society…Money has been made cheap for the rich and dear for the poor…Wages have been held down and income taxed; and this was not the way the country was designed… Much of the economic activity has been only the transfere of wealth to the rich… Even our total reliance on credit has been manufactured to take wealth from the whole society… Since when should credit be essential to capitalism??? Yet, it is necessary world wide… But take too much, too fast; and your whole market goes to hell… In Das Capital, -a book that is hard to get into and hard to get beyond, which is a wealth of knowledge on many levels, has a statement, and I do not know if it was a quote, or not… But it was, that High Profits and Glut (depression) are synonymous… Back then, there was little of paper money, and when the gold all got into private hands there went the economy… There was no point hiring labor if you could not sell the product… And, with government long denied tax revenue from the rich, the poor exhauted, without rights, income, or disposable property; there is no market, and no bottom apparant to the depression… If the Government trrows a lot of money at the problem they are throwing a lot of paper and numbers at the problem… They ruin the only tool they actually have to deal with the problem, which is monatary policy… Easy money is a big part of the systemic problem because people were continually selling the capital of generation for money that was continually losing value…Now that loss is going to be precipitous; and yet there is no systemic change, andno recognition of the systemic problem… But the problem is real…Money is a form of relationship, and so is property, so is law, so is the economy, and so is the government… If one side has all in a relationship it is no relationship…The thing has to have meaning for both sides… When they get all the wealth and all the power, they do not win the game, but only end the game, and when it starts again it will be with all holding equal amounts…
And yes; the rich do have control of nukes, and they can nuke us…But if we cannot give people an internation economy they have no reason to deal with us… If we try to make it work with inflated dollars, we have undercut all the money in their hands… Our military is shot…It was misused, as it always is offensively… But it leaves us no choice but to tax the rich to build it up or resort to nuclear war when that should never be considered… But no one is going to part with their wealth…None of those people in this country who consider themselves wealthy concieves of themselves as Americans… They are too good to support our society…They refuse to see themselves taxed… They think it is their privilege to feed on us, and who can say they are not wrong, since until the moment they ruined this market and this economy they were on top of the world…

[quote=“d0rkyd00d”]
So I’m sure everybody’s aware of the second economic stimulus package that is going through Congress.

Suppose it doesn’t work. What options will we have left?

I’m not really worried about the U.S. too much, seeing as how we hold the big guns. Even without money, we’ll still be the leading superpower due to our military (let me know if you think otherwise!).

DBL post

The paper is a form of relationship, but they can ruin the relationship…It is wealth, another form of relationship that is behind the money; and when the rich have it all there will be no relationship…Those things, protected by law, and law and society themselves are only as good as their general support…When people realize they have been screwed by their forms, they will form new relationships…They will have no choice…No one ever supports a form that is clearly killing them… So the answer is not just a change of this or that detail, of money supply or taxation; but a complete change…It does not work…They may possibly get it up, but look at how often governent has had to put the economy on life supports lately…It does not work, and they are going to ruin our future and cash in our freedom to make it work??? No… They will end the game, and that is not the object… It is like slavery in the South… It never paid, except for the financial end… And yet they won…They had it all going their way; but it was because they won and never lost on the subject of slavery that the relationship between North and South fell apart… The dynamic was gone…The give and take of any relaitonship was gone… The North saw it as all give, give, give… The South saw the powerlessness of the political process, that the North could only demand, demand, demand… But long before it was actually necessary they resorted to violence in the defense of their institution because they saw it was doomed… The same thing is true of wealth in this country…They will hire a private military before they will share rights and political power with us…They will not support the govenment… They will not pay taxes…They will employ violence just as they have employed threats…But sooner or later we will realize the relationship is done…