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Here's something I've been thinking about for a few days. Suppose the government does a massive bailout of everyone. They guarantee jobs, they give everyone mo

Here's something I've been thinking about for a few days. Suppose the government does a massive bailout of everyone. They guarantee jobs, they give everyone money so they don't run out. And it works. In a few months from now, the economy turns out to have just hit a speed bump and everything is back to how it was. What does that say about the economy? I mean if we can stop working and basically just lend ourselves money, and we're fine, what else is fine? Why don't we borrow some money to fix climate change? What about poverty, why would that exist at all? Should we have a reckoning with all the people who said austerity was a good idea?

tomcam 7y ago
It would all be put on the credit card, like the $23 trillion we owe at the moment. Might be another, let’s say, $4 trillion. The only ways to get out of that number are defaulting on the debts, which would greatly harm pension plans and other countries, or inflate our way out it, which could easily lead to hyperinflation, which would ruin pension plans and the world economy.
- brianwawok 7y ago
  It’s too simplistic to call it a credit card. If I spend more than I earn, sure it goes on a credit card. I have to find a way out. If a country that prints money spends more than it makes... it can print more.
- cultus 7y ago
  The government can print money, and buy back the debt. Excessive inflation only occurs when the combination of private and public spending is chasing after too few goods. We've been deficit spending like crazy for years and the inflation rate has been too low if anything.
andrekandre 7y ago
maybe something along those lines would be mmt? https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
- lordnacho 7y ago
  That's what I'm alluding to, yes. If there was ever a test of it, this would be it. I guess we see what happens soon.
  - lonelappde 7y ago
    MMT is a technical variation on Keynesianism, which is how the US escaped the great depression and stimulated 70 years of near constant growth except during an oil supply crisis. Maybe next time it will be justified on general economic merit.
nostrademons 7y ago
Different crises have different effects on the economy. Or, to paraphrase Anna Karenina, "All healthy economies are alike. Each depressed economy is depressed in its own way." What we need to do with coronavirus lockdowns is essentially to pause the economy. Cut all social contact off, let the virus run its course, develop a treatment or vaccine, and then reboot the economy. If the economy was healthy before (and most people say it generally was, despite a few doomsayers), that shouldn't be impossible. You could do it either by guaranteeing basic needs for the duration of the crisis, or by lending money on a short-term basis for the duration of the crisis, or by pausing all time-based payments like rent and debt. Other economic recessions have had different causes: 2009 and 2001 were because the financial sector invested lots of money in unproductive sectors (real estate and dot-coms, respectively), and then that malinvestment needed to be written off and reinvested in more productive sectors of the economy before it could return to normal. That takes time, and it takes capital, and for people in the unproductive sectors it never happens. Tech started recovering in about 2011, while folks in coal mining or steel milling will probably never get their jobs back. 1973 was a supply shock. The price of oil went up rapidly. Everything else in the economy depends upon oil, or transportation using oil. Therefore, the price of everything else went up, and many marginal sectors of the economy were eliminated. All the massive bailout managed to do here was increase the price of everything. 1929 was a combination of everything going wrong. There was a speculative bubble during the 1920s which meant that a lot of capital was invested in Florida real estate, rum runners, consumer fads, and other unproductive sectors. There was a contraction of the money supply from 1929-1931 because the Fed screwed up. And then there was the dust bowl in 1931, which was a force majeure that added a supply shock. Climate change is a much broader problem that affects the whole world. It'll likely result in massive migrations and productivity differentials across nations. If you have a free global market with porous national borders, the global economy will likely adapt, but there will be massive regional winners and losers. If you close the borders and try to deal with it on a national level, you'll probably get war. Poverty is a consequence of liberty. If you let individuals make their own deals, some will inevitably make bad ones. Totalitarian regimes often have much lower inequality (excepting the ruling class), at the expense of everyone being poor. On an absolute level, even the poor in America are much better off than the rich in say the DRC. Note that if the coronavirus isn't contained - if we just let people die instead of stopping it - we're likely to end up with a 1973-style supply shock rather than a graceful reboot. Except much worse. Labor is a factor of production for everything, and if people are dead, they can't work. When this happened after Black Death, the whole feudal system collapsed and we got the Rennaissance and modern market economy.
vanniv 7y ago
The shortage of money is not the problem. The problem is that we have stopped making stuff. Once the warehouses all empty, there will be no more products. All those nice things you are used to buying to make your life nice and safe and clean and fun will be gone. The infrastructure to even make the stuff will decay and be gone. Printing money doesn't make products. It doesn't repair factories. It doesn't prevent the coming collapse of the prosperity we have enjoyed these last 100 years.
- nopriorarrests 7y ago
  > It doesn't prevent the coming collapse of the prosperity we have enjoyed these last 100 years lots of people are tweeting that they are 3-4 weeks from disaster. that's some very special definintion of prosperity. These are numbers that come to mind when you think about middle age peasant.
  - vanniv 7y ago
    Yeah, they are 3-4 weeks from disaster because every would-be dictator around the world has outlawed production in an effort to enslave their populations, and it is working. We are deindustrializing the entire world as fast as it can be done. You have no idea what medieval peasant life was like -- but you are going to find out
  - dominotw 7y ago
    people count on being bailed out so why would they save?
- amluto 7y ago
  Also the small businesses (cafes, restaurants, independent retail) that makes cities interesting will be in extremely bad shape.
- smacktoward 7y ago
  What it does do is shore up demand, which is why all those products got made in the first place. They got made because someone had an expectation that they could sell them. Nobody is going to be making anything to sell if the entire population has no money. This is why it's essential that relief go to directly to people, and that we free those people up enough from expenses that aren't directly economically productive (things like rent, say) as we can. We want people to have money to spend, so producers will have a reason to go on making things to sell them.
lonelappde 7y ago
What we lose are all the innessential luxuries like bars and restaurants and retail therapy that costs resources and create pollution.
- jnwatson 7y ago
  Bars and restaurants don’t consume a lot of resources. The entire economy is built around people doing things and making things for other people. If that stops happening, the whole system falls apart.
TheSpiceIsLife 7y ago
Ultimately, "the economy" is just a shared fiction. We can tell ourselves a different story about what's important.. We certainly haven't been optimising for anyone's well being in a holistic sense, so maybe we should try telling ourselves that is important. You know, basic food, clothing, shelter, medical care for all. Maybe even some serious discussion on where we are and where we want to be 10, 50, 100 years from now. If everything is pitched as a competition, as it has been, of course there's going to be losers and winners. I'm not convinced it has to be that way.
_bxg1 7y ago
I definitely believe that the wealth exists right now for everyone to do just fine without these months of productivity. If only it were distributed correctly. But that's the problem: our economic system has to be a system, and arbitrary exceptions have to be... er... the exception, not the norm. What's hard (though not nearly as hard as certain politicians would tell you) is creating a system that allows for both proper creation and distribution of wealth, and works in all cases. The right-wing tends to write off the second objective as intractable (not always in good faith) and focuses on the first one. The left-wing tends to neglect the third objective (being systematic/working in all cases). Think of it this way: it's easy to write a piece of code that does one exact thing. It's hard to create a system of code that does the right thing in all possible cases, including ones you haven't thought about. All of that said: we have plenty of resources and ingenuity to solve this problem and build that system. We're just hampered by some incompetent actors and by other bad-faith actors who don't want it to exist because they benefit from the one that we have.
thedudeabides5 7y ago
Inflation. That’s the consequence. But it’s been so long, everyone who fought the last war is dead or retired. If we keep demand the same, by paying a quarter of GDP, but supply contracts....same dollars of demand for less quantity. Like the cost of face masks or paper towels, but for all the other stuff that doesn’t get made.

tomcam 7y ago

It would all be put on the credit card, like the $23 trillion we owe at the moment. Might be another, let’s say, $4 trillion. The only ways to get out of that number are defaulting on the debts, which would greatly harm pension plans and other countries, or inflate our way out it, which could easily lead to hyperinflation, which would ruin pension plans and the world economy.

brianwawok 7y ago
It’s too simplistic to call it a credit card. If I spend more than I earn, sure it goes on a credit card. I have to find a way out. If a country that prints money spends more than it makes... it can print more.
cultus 7y ago
The government can print money, and buy back the debt. Excessive inflation only occurs when the combination of private and public spending is chasing after too few goods. We've been deficit spending like crazy for years and the inflation rate has been too low if anything.

andrekandre 7y ago

maybe something along those lines would be mmt? https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory

lordnacho 7y ago
That's what I'm alluding to, yes. If there was ever a test of it, this would be it. I guess we see what happens soon.
- lonelappde 7y ago
  MMT is a technical variation on Keynesianism, which is how the US escaped the great depression and stimulated 70 years of near constant growth except during an oil supply crisis. Maybe next time it will be justified on general economic merit.

nostrademons 7y ago

Different crises have different effects on the economy. Or, to paraphrase Anna Karenina, "All healthy economies are alike. Each depressed economy is depressed in its own way." What we need to do with coronavirus lockdowns is essentially to pause the economy. Cut all social contact off, let the virus run its course, develop a treatment or vaccine, and then reboot the economy. If the economy was healthy before (and most people say it generally was, despite a few doomsayers), that shouldn't be impossible. You could do it either by guaranteeing basic needs for the duration of the crisis, or by lending money on a short-term basis for the duration of the crisis, or by pausing all time-based payments like rent and debt. Other economic recessions have had different causes: 2009 and 2001 were because the financial sector invested lots of money in unproductive sectors (real estate and dot-coms, respectively), and then that malinvestment needed to be written off and reinvested in more productive sectors of the economy before it could return to normal. That takes time, and it takes capital, and for people in the unproductive sectors it never happens. Tech started recovering in about 2011, while folks in coal mining or steel milling will probably never get their jobs back. 1973 was a supply shock. The price of oil went up rapidly. Everything else in the economy depends upon oil, or transportation using oil. Therefore, the price of everything else went up, and many marginal sectors of the economy were eliminated. All the massive bailout managed to do here was increase the price of everything. 1929 was a combination of everything going wrong. There was a speculative bubble during the 1920s which meant that a lot of capital was invested in Florida real estate, rum runners, consumer fads, and other unproductive sectors. There was a contraction of the money supply from 1929-1931 because the Fed screwed up. And then there was the dust bowl in 1931, which was a force majeure that added a supply shock. Climate change is a much broader problem that affects the whole world. It'll likely result in massive migrations and productivity differentials across nations. If you have a free global market with porous national borders, the global economy will likely adapt, but there will be massive regional winners and losers. If you close the borders and try to deal with it on a national level, you'll probably get war. Poverty is a consequence of liberty. If you let individuals make their own deals, some will inevitably make bad ones. Totalitarian regimes often have much lower inequality (excepting the ruling class), at the expense of everyone being poor. On an absolute level, even the poor in America are much better off than the rich in say the DRC. Note that if the coronavirus isn't contained - if we just let people die instead of stopping it - we're likely to end up with a 1973-style supply shock rather than a graceful reboot. Except much worse. Labor is a factor of production for everything, and if people are dead, they can't work. When this happened after Black Death, the whole feudal system collapsed and we got the Rennaissance and modern market economy.

vanniv 7y ago

The shortage of money is not the problem. The problem is that we have stopped making stuff. Once the warehouses all empty, there will be no more products. All those nice things you are used to buying to make your life nice and safe and clean and fun will be gone. The infrastructure to even make the stuff will decay and be gone. Printing money doesn't make products. It doesn't repair factories. It doesn't prevent the coming collapse of the prosperity we have enjoyed these last 100 years.

nopriorarrests 7y ago
> It doesn't prevent the coming collapse of the prosperity we have enjoyed these last 100 years lots of people are tweeting that they are 3-4 weeks from disaster. that's some very special definintion of prosperity. These are numbers that come to mind when you think about middle age peasant.
- vanniv 7y ago
  Yeah, they are 3-4 weeks from disaster because every would-be dictator around the world has outlawed production in an effort to enslave their populations, and it is working. We are deindustrializing the entire world as fast as it can be done. You have no idea what medieval peasant life was like -- but you are going to find out
- dominotw 7y ago
  people count on being bailed out so why would they save?
amluto 7y ago
Also the small businesses (cafes, restaurants, independent retail) that makes cities interesting will be in extremely bad shape.
smacktoward 7y ago
What it does do is shore up demand, which is why all those products got made in the first place. They got made because someone had an expectation that they could sell them. Nobody is going to be making anything to sell if the entire population has no money. This is why it's essential that relief go to directly to people, and that we free those people up enough from expenses that aren't directly economically productive (things like rent, say) as we can. We want people to have money to spend, so producers will have a reason to go on making things to sell them.

lonelappde 7y ago

What we lose are all the innessential luxuries like bars and restaurants and retail therapy that costs resources and create pollution.

jnwatson 7y ago
Bars and restaurants don’t consume a lot of resources. The entire economy is built around people doing things and making things for other people. If that stops happening, the whole system falls apart.

TheSpiceIsLife 7y ago

Ultimately, "the economy" is just a shared fiction. We can tell ourselves a different story about what's important.. We certainly haven't been optimising for anyone's well being in a holistic sense, so maybe we should try telling ourselves that is important. You know, basic food, clothing, shelter, medical care for all. Maybe even some serious discussion on where we are and where we want to be 10, 50, 100 years from now. If everything is pitched as a competition, as it has been, of course there's going to be losers and winners. I'm not convinced it has to be that way.

_bxg1 7y ago

I definitely believe that the wealth exists right now for everyone to do just fine without these months of productivity. If only it were distributed correctly. But that's the problem: our economic system has to be a system, and arbitrary exceptions have to be... er... the exception, not the norm. What's hard (though not nearly as hard as certain politicians would tell you) is creating a system that allows for both proper creation and distribution of wealth, and works in all cases. The right-wing tends to write off the second objective as intractable (not always in good faith) and focuses on the first one. The left-wing tends to neglect the third objective (being systematic/working in all cases). Think of it this way: it's easy to write a piece of code that does one exact thing. It's hard to create a system of code that does the right thing in all possible cases, including ones you haven't thought about. All of that said: we have plenty of resources and ingenuity to solve this problem and build that system. We're just hampered by some incompetent actors and by other bad-faith actors who don't want it to exist because they benefit from the one that we have.

thedudeabides5 7y ago

Inflation. That’s the consequence. But it’s been so long, everyone who fought the last war is dead or retired. If we keep demand the same, by paying a quarter of GDP, but supply contracts....same dollars of demand for less quantity. Like the cost of face masks or paper towels, but for all the other stuff that doesn’t get made.