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"inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? how can we find 1.5t in the budget but no money for universal healthcare, student loan
by asickness231 7y ago
"inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? how can we find 1.5t in the budget but no money for universal healthcare, student loan forgiveness, ubi etc.
The markets wouldn't be so important if there were a safety net.
</soapbox>
- anonu 7y agoNot all dollars are created equally
- munk-a 7y agoYea, dollars put into student loan forgiveness actually pay themselves off many times over due to the high velocity of cash in the hands in young people - money injected into the market has a comparatively low velocity and tends to just get exported overseas.
- jvanderbot 7y agoI tend to agree philosophically, but is there data to support this? I'd like to upgrade to informed agreement.
- munk-a 7y agoHere is one source based on income bracket[1] which I think is a pretty strong corollary. Here is a nice visualization of spending by age group[2] and the original source for that data[3]. 1. https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/03/household-expenditures-and-income https://www.pewtrusts.org/en/research-and-analysis/issue-bri... 2. https://engaging-data.com/household-spending-age/ https://engaging-data.com/household-spending-age/ 3. https://www.bls.gov/cex/home.htm https://www.bls.gov/cex/home.htm
- tomp 7y agoWhy would you forgive student loans? That way you reward incompetence. Instead, you should give each young person $300k - some would repay their student loans, others (who were more prudent with their choice of education) would have down-payment for a house or something... Forgiving just the student loans would create massive perverse incentives.
- sg47 7y agoJust like the bank bailout?
- bscphil 7y agoNot taking a stance here either way, but surely it's possible to oppose both the bank bailout and forgiving student loans on the grounds that they both create perverse incentives?
- imtringued 7y agoThe bank bailout was purely about liquidity. Over the long term the banks are going to repay the loans. Student loans are a long term problem. The only way you could fix it is by sending students back to college and force them to get a profitable STEM degree.
- munk-a 7y agoBecause those student loans were made in bad faith to people who were too young to realize how badly they were being exploited and how meaningless their education was - for clarification I've paid off all of mine, and I'm still happy to see zero benefit out of this expenditure because it'll be just and help the economy.
- imtringued 7y agoYou didn't meaningfully address the parent which was talking about rewarding this exploitation. Imagine you are a college and instead of investing into high quality education you try to get as many students to enroll through concessions even if it means that they cannot repay their loans because of bad job prospects. If students know that their loans will be forgiven then they might go for the "expensive vacation" college instead of the "boring nerd" college with those super strict professors.
- strstr 7y agoOften this type of action is not the government spending that level of money with nothing in return. Generally it is buying an asset it intends to sell later (often at a profit).
- rcar 7y agoFor sure. People still get up in arms about the 2008 bank bailout without realizing that it ended up resulting in a $121B profit to the government: https://projects.propublica.org/bailout/ https://projects.propublica.org/bailout/
- spaced-out 7y agoI tried to click your Propublica link because I want to see their numbers, since the wiki article on TARP points out that the "profit" the government made comes out to a 0.6% annualized interest rate, so once you take inflation into account the government actually lost money. https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
- rcar 7y agoThe Propublica link includes both TARP and the government's investments in Fannie/Freddie, which provided heavy dividends and is where a large portion of the profits have come from. That aside, the common misperception of TARP is that the government gave away $400+B of taxpayer money, which is a very, very far cry from a small inflation-adjusted loss.
- spaced-out 7y ago>the common misperception of TARP is that the government gave away $400+B of taxpayer money I don't think this is a common misconception, I think it's a strawman argument to deflect criticism of the bailouts. Regardless of whether or not the government made money, we created a massive moral hazard by allowing banks to engage in shady behavior, avoid any criminal prosecution, get below-rate loans to avoid the market consequences of their actions, and left the common people out in the cold. On top of that, we supposedly fixed the problem by expanding banks' reserve requirements, but when they got into trouble in the repo market, the FED runs to their rescue with even more below-market-rate loans, which seem to get larger and larger by the week.
- 34679 7y agoThe Federal Reserve is not a government entity and has nothing to do with the budget, which is set by the US congress.
- Frondo 7y agoThe Fed does not set the budget, and is independent of the three branches of government, that's true, but... > The Federal Reserve System is an independent government institution that has private aspects. The System is not a private organization and does not operate for the purpose of making a profit. From https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reserve_System https://en.wikipedia.org/wiki/Structure_of_the_Federal_Reser...
- lbotos 7y agoUh what? Fed = Monetary policy == Make sure money can flow "appropriately" Government = Fiscal Policy == "Who gets money" I don't know how your quote is relevant at all.
- scrumbledober 7y agothe part where it says the fed is a government institution...
- Frondo 7y agoSpecifically, "the fed is a private bank" is a common refrain among goldbugs and currency conspiracy theorists, and it's not true, no matter how often it's repeated. Not saying the OP is a goldbug or currency conspiracy theorist, but they're the only people I ever see tossing that out so quickly and without any elaboration on what they mean.
- exclusiv 7y ago> The System is not a private organization and does not operate for the purpose of making a profit. > Specifically, "the fed is a private bank" is a common refrain among goldbugs and currency conspiracy theorists, and it's not true, no matter how often it's repeated. I'd recommend reading The Creature from Jekyll Island. Once you understand the origins of the Fed you will understand that it's an institution founded by public and private individuals and entities to drive profit and leverage the system and taxpayers where it can. It's a creature with public/private/independent parts. It requires no conspiracy because much is known about it, although most people are unaware. JP Morgan, Wells Fargo, Citibank, the government and others founded it together! "At the end of November 1910, Senator Nelson W. Aldrich and Assistant Secretary of the U.S. Treasury Department A. Piatt Andrew, and five of the country's leading financiers (Frank Vanderlip, Henry P. Davison, Benjamin Strong, and Paul Warburg) arrived at the Jekyll Island Club to conduct a secret meeting to plan the country's monetary policy and banking system, formulating during the meeting the Federal Reserve as America's next central bank.[14] [15] According to the Federal Reserve Bank of Atlanta, the 1910 Jekyll Island meeting resulted in draft legislation for the creation of a U.S. central bank. Parts of this draft (the Aldrich plan) were incorporated into the 1913 Federal Reserve Act." [1] [1] https://en.wikipedia.org/wiki/Jekyll_Island#Planning_of_the_Federal_Reserve_System https://en.wikipedia.org/wiki/Jekyll_Island#Planning_of_the_...
- adaisadais 7y agoWe have a fiat currency. The Government creates “money” whenever it pleases. The money is “Backed by the full faith and credit of the United States”. I completely agree that in the long term this is completely faulty and just helps to exacerbate the underlying causes of economic crisis. But our government (typically) does not act in long-term interests. We as a people do not hold our politicians accountable.
- TheSoftwareGuy 7y ago>The money is “Backed by the full faith and credit of the United States”. I'm pretty sure its treasury bonds that are "Backed by the full faith and credit of the United States". Dollars are backed essentially by what you can buy with them.
- gen3 7y agoThe US dollar was at one point backed by a gold and silver standard, meaning that you could always go redeem the cash for a specific amount of the metal. After the Great Depression the US moved away from the standard, backing the money with the faith in the US government. This is why each note has “Backed by the full faith and credit of the United States” printed on it. https://en.m.wikipedia.org/wiki/History_of_the_United_States_dollar https://en.m.wikipedia.org/wiki/History_of_the_United_States... https://www.reference.com/business-finance/backs-up-currency-united-states-today-17abf1ea677c41d5 https://www.reference.com/business-finance/backs-up-currency...
- TheSoftwareGuy 7y ago>This is why each note has “Backed by the full faith and credit of the United States” printed on it. No they don't. I just checked three different bills in my pocket (a $1, a $10 and a $100) and none of them say this. They say "This note is legal tender for all debts public and private" but there is absolutely no reference to "the full faith and credit of the united states"
- SilasX 7y agoI 100% agree that the Fed's actions are troubling and it's boxed itself into a corner, and has very ineffective tools for what it's trying to do, but ... This injection isn't really comparable because those other things are expenditures, while the 1.5t refers to short-term loans to very creditworthy borrowers. It really doesn't come at the cost of providing universal healthcare.
- ipnon 7y agoThe Fed isn't printing 1.5 trillion greenbacks and handing out fat sacks on Wall St. They are providing short-term loans to increase the amount of money in circulation (liquidity). The intent is to increase the total amount of trading occurring so that the market can return to equilibrium sooner than later. The Fed wants to prevent firms from not making trades solely for lack of liquidity in the market. edit: "from making profitable trades" -> "from not making trades"
- JumpCrisscross 7y ago> They are providing short-term loans They're also buying assets, e.g. Treasuries. This is about increasing liquidity, not printing money.
- krtong 7y agoIt's the closest to printing money as the real world gets. "Hey here's an insane amount of money at 0% interest rate so you could literally invest in ANYTHING and make free money. Go ham." Lets remember what causes slowdowns in productivity, panics, the great depression, the recession etc: people being slammed with too high interest rates for what's feasible for them to repay when times are tough. If the fed offered low interest rates directly it would be a different world. Remember also, the world is an auction house, so when people get these kinds of perks and you don't, your money doesnt go as far.
- mamon 7y ago>> They are providing short-term loans If I want to give my friend a loan, I need to earn that money first by working hard. FED does not conduct any profitable activity that would earn them any money, they DO PRINT that money from thin air.
- kylebenzle 7y agoWhy do people keep telling the lie that the FED "does not print money"? As you say, these "loans" are the FED printing $1.5t, no other way to look at it.
- stevetodd 7y agoWhen you hear the Fed, it is referring to the Federal Reserve. The Federal Reserve is independent of the federal government. Essentially, it's the entity that can print money. When it does, it doesn't just give the money away, but it injects the cash by purchasing assets and making loans. It also does the reverse by selling assets. So this money doesn't come out of the Federal budget. https://en.wikipedia.org/wiki/Federal_Reserve#Tools https://en.wikipedia.org/wiki/Federal_Reserve#Tools
- taiwanboy 7y agoFolks. Companies listed on the stock market hire average folks who need the money to provide for their spouses and kids. Companies that provide staples to you like food and gas and transportation and medical supplies. These are the companies you are actively shorting. Think about that. This isn’t the same as 2008.
- munk-a 7y agoCompany's welfare is somewhat connected to their stock price, but it's a really weak relation. The stock market is mostly a gambling simulator that runs beside the economy as it's own little micro-economy - this doesn't make it worthless but it does make this sort of a statement ring really hollow.
- taiwanboy 7y agoThese days companies are VERY tied to quarterly EPS guidance and stock prices. Layoffs and adjustments closely follows that as well.
- whateveracct 7y agoIt's like fantasy basketball vs real basketball
- jacquesm 7y agoThe connection with the real world is made whenever a company floats some of their stock.
- jacquesm 7y agoOnly when those companies are trying to raise money. In the meantime, it is the speculators and the institutionals that hold a large chunk of what has been floated.
- oxymoran 7y agoThis isn’t a bailout for wall street, it’s an attempt to bailout the economy as a whole because there isn’t enough money in the banking system to cover the institutional sell off. In other words, they had to do this to prevent a run on the banks which would royally fuck everyone.
- sg47 7y agoYes, because banks are over-leveraged. Regulations that kept leverage in check have been overturned by the GOP.
- missedthecue 7y agoCompletely and utterly false. Banks are at their lowest leverage of the last 40 years. This is verifiable hard data.
- OGWhales 7y agoCan you help me find this data?
- gentleman11 7y agoBy contrast, the Hong Kong plan is to mail a grand to every citizen (iirc)
- ryandvm 7y agoBecause the people that pay for campaigns already have healthcare. The more money you allow into politics, the more politics is about money.
- partiallypro 7y ago$1.5 Trillion goes into a certain aspect of the money supply to help maintain credit spreads, etc. This is completely different than your agenda list expenses. If you flooded the entire US economy with $1.5 trillion in straight cash it would likely cause inflation, but the Fed isn't injecting it into that level of the money supply.
- 99052882514569 7y ago>how can we find 1.5t in the budget Central bank ≠ treasury.
- golergka 7y agoJust a reminder, "bailout" is loans, not gifts. US government got it's 2008 bailout money back with interest.
- nathancahill 7y agoIf we're getting in to the weeds on the ebb and flow of money to and from the government, universal healthcare saves the government money rather than costing it money.
- rlt 7y agoI'm genuinely curious what evidence there is for this?
- nathancahill 7y agohttps://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1003013 https://journals.plos.org/plosmedicine/article?id=10.1371/jo...
- aantix 7y agoWhile good long term health is nice, no one wants to be on the receiving end of mass hysteria when individuals find out they can't withdraw their money.
- paulmd 7y agothese are overnight loans that are intended to allow normal overnight financing to continue even if the markets siezed up because everybody is so panicked nobody wants to let loose of their cash. Yes, this means the Fed is very very worried about the state of the market, it means they think it's at risk of stopping normal operation. Maybe not ongoing crisis but they're worried about crisis in the near future. The fact that the stock market circuit breaker has been hit a grand total of once before, back when it used a different set of rules and was easier to hit, and then we've hit it twice in a week is pretty fucking bad news, if that sets the backstory for you at all.
- aguyfromnb 7y ago>inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? Banking clients are demanding more liquid assets (ie cash) than banks have access to, so they are swapping treasuries for cash from the Fed. It's not like this is banking profits; would you rather the bank fail and you or your business or your employer lose everything you had there? Because that is also an option.
- imtringued 7y agoPeople always forget that the bank bailout is ultimately about people protecting their own bank accounts. If you dislike the incompetent banks then take your business to a bank you trust.
- OGWhales 7y agoThere aren’t any
- FlyMoreRockets 7y agoCredit unions are generally trustworthy.
- chonitoe 7y agoI trust my BTC wallet.
- malandrew 7y ago> The markets wouldn't be so important if there were a safety net. The markets literally pay for the entirety of any safety net. Without the markets there are no jobs, so no payroll or income tax revenue. Without tax revenue, there are no safety nets. Without the markets, there are no investments, so no capital gains tax revenue. Without the markets, there is nothing to sell, so no sales tax revenue. Without the markets, there is capacity for charity. If you don't understand how critical the markets are to the functioning of the country, you don't understand how countries function.
- jonahbenton 7y agoThis is debt, not equity. The "budget" is equity.
- stevenwoo 7y agoYes. The 500 million they injected yesterday stopped the freefall for 30 minutes. https://www.bloomberg.com/news/articles/2020-03-12/n-y-fed-to-conduct-purchases-across-range-of-maturities-k7ozy3u5 https://www.bloomberg.com/news/articles/2020-03-12/n-y-fed-t...