10 ms·

We could give money to people/government directly. Why create money as private debt?

• claudeganon 7y ago
  Because America is built around the primacy of authoritarian corporate structures. Disintermediating them through sustained direct payments to individuals or even states would upend these businesses’ stranglehold on workers and our democracy.
• thomashobohm 7y ago
  Yes, giving money to people/governments directly is a good idea, but it's not something the Fed can actually do. The government has to step in for that sort of policy. This isn't "creating money as private debt"-it's purchasing debt. Eventually, these bonds will pay out, and that will take most of the money just injected into the money supply back out of it. The only new loans it's issuing are to states and municipalities.
  • claudeganon 7y ago
    It’s amazing to me, seeing the flagrant corruption and abuse of these norms and laws over the past few years, that people still cling to ideas like what the Fed can and cannot do. These prohibitions exist only to the extent that they don’t impinge on the power of Capital owners and their institutions and disappear the moment they need bailouts.
    • throwlaplace 7y ago
      you're downvoted (i upvoted) but what you're saying is completely true. everyone that downvotes is one of those "well akcshually..." people. it's plain as day that it's true even if it's not formally true. the formal rules of governance and policy are manipulated to make it so. it doesn't not mean that it isn't so. the old adage that there have always been things that were legal but immoral/unethical applies. longer you bury your head in the sand (people that dissent without any substantive response) the longer we will be mired. here's an example: do you all realize that the banks providing these loans are being paid essentially commission [1] for making the loans? anywhere from 1% to 5%? 5% on 500B is 25B in the pockets of bankers. why? [1] bottom of the page here under PPP incentives https://www.chapman.com/insights-publications-SBA_Paycheck_Protection_Program_CARES_Act_COVID-19.html https://www.chapman.com/insights-publications-SBA_Paycheck_P... . and if you think covering "processing fees" isn't commission then ask yourself as a programmer why it's not a flat incentive? does it cost more to process the paper work for 100k loan than a 10k loan? edit: what in the fuck am i getting downvoted for? i have a literal citation of a tax attorney. i'm not editorializing or taking anything out of context or whatever. it's right there: >the SBA will reimburse lenders for PPP loan processing fees, based on the disbursed loan amount: 5% for PPP loans up to $350,000; 3% for PPP loans greater than $350,000 and less than $2 million; and 1% for PPP loans of $2 million or more what could you possibly disagree with here??? jesus christ forgive me if your naive understanding of the world doesn't reflect reality.
      • Karunamon 7y ago
        >it's plain as day that it's true even if it's not formally true What does this mean? It's either verifiably true or it is not.
        • throwqwerty 7y ago
          i don't understand this response. are you truly unaware that the truths of many policies are "verifiable" but not practically verifiable until many many years after they are implemented. again - this is the whole point of the study of history.
          • Karunamon 7y ago
            Could you give an example?
          • dang 7y ago
            Obviously it isn't legit to use multiple accounts like this. I've banned this one. If you don't want to be rate limited on HN, we're happy to take off the penalty whenever anyone sincerely wants to use HN in the intended spirit. If you keep breaking the site guidelines with your main account, we're going to have to ban that as well. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
    • thomashobohm 7y ago
      Please show me a single time in history when the Fed has implemented a fiscal stimulus. I'll wait. I, personally, believe we need a stimulus for working families, and that we should significantly increase taxes on capital owners, etc. If you believe in that too, then you should be directing your energy towards getting the government to pass a stimulus, not towards trying to get the Fed to do it (they can't). BTW, even in a socialist utopia, presuming that there are still markets and currency, we will probably still need an independent central bank.
      • throwlaplace 7y ago
        >Please show me a single time in history when the Fed has implemented a fiscal stimulus. I'll wait. please show me a single time in history that the Fed has leant directly to businesses, states, and local governments; from the article >and reached into unchartered territory to support American businesses, states and local governments. so hmmmmmmmmmmmmmmm
      • pjmorris 7y ago
        My theory for Fed fiscal stimulus: In 2008, the Fed started buying things that weren't treasuries (e.g. Mortgage Backed Securities (MBS)), and bulking its balance sheet up from ~800 Billion to ~4 Trillion. Some portion of that ~3 Trillion went to buying securities for which there was no other market at the going price. The difference between the market price (what a non-Fed buyer would pay) and what the Fed paid was stimulus to the firms selling the securities. They could turn around and spend that difference in to the economy.
    • chaorace 7y ago
      It's funny, I agree with your points, but I'm concerned for a very different reason! The Fed is an institution staffed by unelected, career technocrats. It's not supposed to have such sweeping powers (and, by charter, it really doesn't), but, like most parts of the executive branch, it has expanded in scope over time due to a steady erosion of our lawmaking institutions. Put bluntly, the Fed can do what it does for the same reason the President can start pseudo-wars without going to congress: it's inconvenient for lawmakers to cop to such responsibilities. The other branches of government are simply shoring up the holes. To be honest, I like the Fed a lot... In so far as grossly unchecked power goes, we could have far less competent people at the helm (The fact that so few in monetary policy wind up in congress is the real tragedy, if you ask me). That being said, future performance is no guarantee. History shows that it is not so simple to take back power once ceded for the sake of expediency when it is no longer convenient.
      • eldavido 7y ago
        Nailed it. The question is how you put the genie back in the bottle. I think this is the core insight of small-government conservatism. When big, powerful institutions exist, they can do great things...provided they're always run by exceptional people. But when they're not, the damage they can do is incalculable. So the question becomes, how do you create a system with the best long-run survival properties? I, I suspect much like you, would like it if there was some way we could return a bit of power back to Congress and other institutions, and away from the huge executive we have today, in 2020. It just feels like a ticking time bomb until the wrong people get the helm.
        • jameslevy 7y ago
          A ticking time bomb until the wrong people are at the helm of the executive branch? I'm not hearing ticking so much as a loud ringing in my ears.
        • pengstrom 7y ago
          It sounds like a lack of insight and accountability. I don't see a large government as a problem, but unchecked power. As long as all people in power are democratically appointed, subject to transparency and with accountability, errors can be corrected.
  • pjmorris 7y ago
    > Eventually, these bonds will pay out, and that will take most of the money just injected into the money supply back out of it. That's the theory, first given when the Fed expanded from buying treasuries in to buying bonds back in 2008. Looking at their balance sheet [0], it isn't working that way in practice. [0] https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
    • OscarCunningham 7y ago
      Why does the absolute size of the balance sheet matter if inflation is steady?
      • pjmorris 7y ago
        If wages followed asset prices, it likely wouldn't matter. If everyone was making 4-6 times what they were a decade ago, the playing field would be level.
        • OscarCunningham 7y ago
          What playing field? Everyone's using the same dollars.
          • pjmorris 7y ago
            The playing field is buying power, measured in dollars. The dollars earned from a person(entity) selling a bond to the Fed at a price that only the Fed would buy are new to the money supply. The dollars earned from a person selling hours of labor in to the labor market are subject to other market forces and are harder to come by, as evidenced by the fact that most people don't have 4-6 times the wages or savings that they did back when the Fed's balance sheet was ~800 Billion in US Treasuries, 12-13 years ago. Inflation isn't steady, it's lumpy, which makes the playing field lumpy.
• whatok 7y ago
  The Fed (rightfully) does not have the authority to do that.
• throwaway_USD 7y ago
  Government indebted every US taxpayer $18,000+ on the promise of a $1,200 check per person...the remainder is given to the FED to "lend" back to taxpayers and businesses. In other words, imagine I took $18,000 from you, paid you $1,200 directly from the $18,000, then I loaned you the balance and charged you interest on the the very money I took from you and loaned back to you. What should have happened is exactly as you say, give the people $18,000 and allow them to spend it or loan it for the benefit of hurting businesses and the economy and allow the taxpayers to make interest.
  • tantalor 7y ago
    Your analogy is only true on average. In reality, most people are not net losers, but some (with high savings) stand to "lose" a lot.
    • enchiridion 7y ago
      Why do you say that? Because of inflation?
      • __s 7y ago
        People who didn't have 18000 to begin with didn't lose 18000
        • grecy 7y ago
          But $18,000 in taxes they've paid (or will pay) that should have been spent on roads, schools, hospitals and more social services won't be. So everyone's life is $18,000 worse off. Do I have this wrong?
          • __s 7y ago
            Yes you have this wrong, because taxes are not a flat fee. However, you could argue that the tax money is equally shared across citizens at the time 18000 is taken, but now we're getting into arguing semantics
• coliveira 7y ago
  The ruling class will not let money go directly to people, they prefer to use the "trickle down" illusion.
  • nicbou 7y ago
    Is there any backing to this claim beyond "it's pleasant to hear"?
    • throwlaplace 7y ago
      yes - it's called history and not being blind to the forest over the trees. you can literally look back to the beginning of this country and see policies that were double speak. the revolutionary war itself was essentially theater for distracting poor people from the lucre of the wealthy[1]. we know this because that is the work of historians - to unearth the truth in retrospect. there are direct quotes from "founding fathers" about the intent of the war. it's also why, for example, native americans and slaves fought on the side of the british (both were promised freedom). [1] howard zinn's people's history of the united states
  • malandrew 7y ago
    Going directly to people does not maintain jobs for people to return to. You know that saying about teaching a man how to fish. Saving the businesses is the same as grabbing the fishing rod so the fish don't pull it into the ocean and the man has no rod to return to. Giving it directly is giving the man a fish so he feeds himself for a day (something we are also doing with $1200 checks). If we don't grab the rod and save it, we're stuck feeding the man for many days, until there is another rod available to use. You may ask "Why not just buy the man a fishing rod?" Well because there is no rod and rods don't scale to support a population of 330 million people. We're past the point in our economy where everyone can sustain themselves solo. It's more like fishing nets (companies) that each require dozens to thousands of people to operate to pull in a catch. We're saving the fishing nets. We lose enough fishing nets and soon enough there won't be enough fish to collect as tax and redistribute to those we need to feed for a day. The ability to hand out anything at all is backed by the fishing nets and the people operating them. You need to save both.
• xhrpost 7y ago
  Been wondering this myself. In my mostly uneducated mind, something to remember is that if you "print" money and give it to people, there's no way to really get it back (that is, control the money supply in both directions). Sure you could just increase taxes but taxes can't even cover the budget, let alone decrease the money supply. If the Fed instead purchases assets such as MBS, corporate bonds and especially Treasury bonds (yes, the biggest owner of US government debt is actually the US government), those assets can later be sold. The Fed can then pull the money back out of the supply for future use. Assuming of course that high risk MBS and junk corporate bonds don't expire worthless.
  • deleted 7y ago
    [deleted]
• AngrySkillzz 7y ago
  Fed does not have the authority to do that, per se. Fiscal stimulus is congress and the Treasury's job. Monetary policy is a completely different thing. The Fed is already buying Treasury bonds, which are in part being used to fund the direct stimulus measures in the form of PPP grants/loans, unemployment payments, and the $1200 check. In addition to buying PPP loans themselves. So the current situation is about as close to what you are suggesting as is legally possible.
• dahfizz 7y ago
  The fed buying assets is not the same thing as giving away money. A better analogy would be "why not lend money to people instead of businesses?". Here the answer is more clear: people are not in need of someone to give them loans. If you need a loan, you can probably get one.
• rb808 7y ago
  > We could give money to people/government directly. Why create money as private debt? Effectively it is. Government borrows money from the Fed and pays everyone a $1200 stimulus check.
• JumpCrisscross 7y ago
  > We could give money to people/government directly The Fed doesn’t have the legal authority to give individuals money. That’s why the Congress is passing stimulus bills. Moreover, buying assets is different from handing out money. When Congress gives every American $1,200 money, the money is spent. There is no balancing entry on the government's balance sheet. When the Fed lends a dollar or buys securities, it spends cash and gains assets. The Fed could lose money on those assets. But that risk profile is night and day to the federal government's. (This difference also makes a dollar of fiscal stimulus more powerful than one of monetary spending.) There are other differences between fiscal and monetary policy, a topic with lots of literature behind it. Congress controls fiscal policy. It has outsourced monetary policy to an independent Fed.
  • nikofeyn 7y ago
    > When Congress gives every American $1,200 money maybe you're using this just as a generalization to not have to state all the details, but just to be clear, that isn't what's happening.