4 ms·

All the money coming from the fed must be paid back, I believe. It seems like this will be difficult to repay. Usually with a loan a business would invest in ca

by gpsx 6y ago

All the money coming from the fed must be paid back, I believe. It seems like this will be difficult to repay. Usually with a loan a business would invest in capital or something similar and there is no value lost. Then there is the hope of return so they can pay off the loan. In this case, what return will people get on the money that comes in for the crisis? I think in this case it is covering lost value. That swill be tough to repay. Or is the fed anticipating losing money? Will this allow the losses to be put on the feds balance sheet rather than some other lender?

Meandering 6y ago
I expect the fed to get a bunch of bankruptcies preventing them from recouping a significant portion of their loans. The big conglomerates and main street businesses will pay their loans. But, the middle companies will liquidate assets into other shells or move lateral within their market while letting the debt bearing entity dissolve.
candiodari 6y ago
No it doesn't. The fed is the only source of dollars in existence, and it only ever loans out dollars. Therefore, if every dollar were to be paid back, how many dollars exist ? Zero. Since that is clearly not what people want, you're right about it never happening. In a modern fiat money system paying back central bank loans changes the money supply. You might be confused because the US did at one point pay back all the government debt (which isn't the Fed's money, that's a separate thing), however looking a bit more closely you might notice that that did not take place in a fiat money system, but in the gold standard (for one thing the Fed didn't even exist when that happened). Analysing yet a bit further you will quickly find out that, if you had the choice, you want to live during a time where the government debt increases, and the number economists vehemently deny is a wild guess on page 5 of every economy book out there (but really, it is a wild guess), is 2% per year, or at this point 330 billion per year. The real US number is about 3.8% per year, and calculating it for many years might make you notice that it seems to follow big mac inflation. That's not a coincidence.

by gpsx 6y ago

Meandering 6y ago

I expect the fed to get a bunch of bankruptcies preventing them from recouping a significant portion of their loans. The big conglomerates and main street businesses will pay their loans. But, the middle companies will liquidate assets into other shells or move lateral within their market while letting the debt bearing entity dissolve.

candiodari 6y ago

No it doesn't. The fed is the only source of dollars in existence, and it only ever loans out dollars. Therefore, if every dollar were to be paid back, how many dollars exist ? Zero. Since that is clearly not what people want, you're right about it never happening. In a modern fiat money system paying back central bank loans changes the money supply. You might be confused because the US did at one point pay back all the government debt (which isn't the Fed's money, that's a separate thing), however looking a bit more closely you might notice that that did not take place in a fiat money system, but in the gold standard (for one thing the Fed didn't even exist when that happened). Analysing yet a bit further you will quickly find out that, if you had the choice, you want to live during a time where the government debt increases, and the number economists vehemently deny is a wild guess on page 5 of every economy book out there (but really, it is a wild guess), is 2% per year, or at this point 330 billion per year. The real US number is about 3.8% per year, and calculating it for many years might make you notice that it seems to follow big mac inflation. That's not a coincidence.