The State of the Economy Thread - “Falling inflation, rising growth give U.S. the world’s best recovery”

[Renegade7]

@gbear honestly, I'd trust Biden to come close enough.  

 

In not convinced McConnel can hold out on stopping legislation this year, we'll just have to wait to see how Kentuckey fairs and how it affects his re-election chances, which I believe the smoke on.

 

But as for social security, I'd propose not only keeping it separate but at minimum doubling it.  That is supposed to be a separate pool of money for a reason, it's mandatory spending.  We should do what we can to protect that, the odds of a recovery without social security drops considerably.  

 

At this rate, because Medicare is also mandatory spending, universal health care has to be right around the corner.  You can't have this many people's insurance tied to their employer when we talking about possible third of the country unemployed.

 

Priorities. What are they?  The world has let us run up the credit card to this point and probably will continue to do so because there is no global recovery without us.

 

Just...who do we borrow money from?  

[FanboyOf91]

Mitch has no say in stopping it. We're gonna need a fourth stimulus bill and he's going to look like an idiot if Pelosi has one ready and he doesn't.

 

[Larry]

29 minutes ago, Renegade7 said:

Just...who do we borrow money from?  

 

People who don't want to put their money in the stock market right now?  

 

US Treasuries have been the world's standard for the safest investment in the world, for probably 100 years.  Think "safety" isn't something that a lot of investors are looking for, right now?  

 

Current interest rates on US Treasuries:  

 

10 year:  0.63%

30 year:  1.47%

 

Right now, the Feds can borrow money for pretty much nothing.  

 

(Now, I'll point out, it's not guaranteed to stay that way.  We absolutely do need a plan for how to at least pay down the credit card, before they decide to quadruple the interest rate.  But speaking as somebody who's been beating Trump over the head for doubling the deficit, ever since he did it, I have considerably less problem with the feds borrowing huge amounts in order to prop up the economies of the citizens, Right Now.)  

 

(Like almost everything about this situation, two months ago would have been even better.  But I'll settle for Right Now.)  

[FanboyOf91]

 

[twa]

50 minutes ago, Larry said:

 

People who don't want to put their money in the stock market right now?  

 

 

 

Yep, they are selling like hotcakes right now

[EmirOfShmo]

2 hours ago, TryTheBeal! said:

 

Like any other stimulus, factory/govt/etc, it tended to act mostly as a pull-ahead mechanism.  In other words, it gave customers who were considering a purchase in the next 8-12 months a strong reason to BUY NOW.  Also, just like any other legislation there were consequences that were realized down the road that were less than ideal.

 

But, I think the law had three clear goals:

 

1). Get product moving for the factories and the dealers and do it quickly.

2). Generate considerable amounts of state and local tax revenue and do it quickly.  

3). Raise the country’s overall fleet MPG at a time when dependence on oil imports was very uncomfortable for us.

 

Tough to argue that this did not occur.  I was on the ground as a GSM for a Lincoln-Mercury/Mazda store at the time and it helped us out quite a bit.  The govt paperwork involved was profoundly unpleasant, of course.  But everyone expected that.  

 

I still socialize with with a few guys from that era and we always look back and laugh about all the ridiculous bureaucratic hoops we had to jump through.  No regrets, tho.

 

My buddy is a wholesaler - and was during Cash For Clunkers Part Uno. He said that deal pretty much killed the used car business. Cars he could buy for cheap were scrapped. As I recall, they poured cement in the cylinder heads. So, cars in the $1-10k range were destroyed (I can't recall the exact range but I think this is close). I *think* there were major penalties if you got caught not sending a car to be destroyed. 

 

Yes, it would be good for new car sales, manufacturing, etc. I hope the details get refined in Part Deux to make up for the deficiencies in Part Uno. 

 

[TradeTheBeal!]

3 hours ago, EmirOfShmo said:

 

My buddy is a wholesaler - and was during Cash For Clunkers Part Uno. He said that deal pretty much killed the used car business. Cars he could buy for cheap were scrapped. As I recall, they poured cement in the cylinder heads. So, cars in the $1-10k range were destroyed (I can't recall the exact range but I think this is close). I *think* there were major penalties if you got caught not sending a car to be destroyed. 

 

Yes, it would be good for new car sales, manufacturing, etc. I hope the details get refined in Part Deux to make up for the deficiencies in Part Uno. 

 

 

That is true.  Wholesalers took the hits.  Of course, wholesalers don’t pay sales tax or property tax or payroll tax.  They employ no one and provide very little in the community.

 

So, what exactly should they expect from the state?

[PeterMP]

5 hours ago, Renegade7 said:

Priorities. What are they?  The world has let us run up the credit card to this point and probably will continue to do so because there is no global recovery without us.

 

Just...who do we borrow money from?  

 

Essentially ourselves through the Fed.  The Fed is buying securities.  As long as they are printing the money and buying the securities in US dollars and the economy is bad, it is hard to imagine there will be much of an issue.

 

https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124

 

"The Fed needed to fight the 2008 financial crisis. In 2008, it ramped up open market operations by purchasing bank-owned mortgage-backed securities.7 In 2009, the Fed began adding U.S. Treasurys.8

 

 By 2011, it owned $1.6 trillion, maxing out at $2.5 trillion in 2014.6 This quantitative easing stimulated the economy by keeping interest rates low. It helped the United States escape the grips of the recession.

 

Did the Fed monetize the debt? In a way, yes. The Fed purchased Treasurys from its member banks, using credit that it created out of thin air. It had the same effect as printing money. By keeping interest rates low, the Fed helped the government avoid the high-interest rate penalty it would incur for excessive debt."

 

And they've now announced that they are going to do unlimited QE (with essentially no oversight).

 

(This is where MMT has it right.  Thinking about the US government and the debt as an individual or even US state fails because you can't pay your bills with something that you are printing.)

Edited April 3, 2020 by PeterMP

[Supernatural24]

4 hours ago, Renegade7 said:

The world has let us run up the credit card to this point and probably will continue to do so because there is no global recovery without us.

 

Just...who do we borrow money from?  

The US can print money. This is what many of us need to realize. We have been told lies about the "who will pay for this?" and "What about our taxes?" nonsense. Before March, the Fed pumped $6 trillion into the economy to boost this castle of sand since December.

 

It is time for us to demand more from our government and start holding people accountable.

[FanboyOf91]

 

[Larry]

Just heard on NPR (Sirius). 
 

According to TSA:  the report on the number of people screened by TSA, for air travel. 
 

Yesterday:  124K

A month ago:  1.7M

 

[NoCalMike]

If Americans don't get a hold on this soon, unemployment may end up almost as high as Trump was falsely claiming it was under Obama. 

[Corcaigh]

1 hour ago, Larry said:

Just heard on NPR (Sirius). 
 

According to TSA:  the report on the number of people screened by TSA, for air travel. 
 

Yesterday:  124K

A month ago:  1.7M

 

Someone I spoke to just flew from

Boston to DC on a plane big enough to have first and economy class. There were two other passengers.

[EmirOfShmo]

4 hours ago, TryTheBeal! said:

 

That is true.  Wholesalers took the hits.  Of course, wholesalers don’t pay sales tax or property tax or payroll tax.  They employ no one and provide very little in the community.

 

So, what exactly should they expect from the state?

Oh, he didn't expect anything from anybody as part of the deal. All he wanted was the ability to buy the used car people were turning in to dealers. He couldn't buy the car from the customer (dealer gave them more $$) nor buy the car from the dealer (who had to destroy the car) after the trade-in. 

 

My buddy does have sales tax, property tax, & payroll tax. He co-owns a used car lot.

[PleaseBlitz]

We are so very ****ed. 

[TradeTheBeal!]

6 minutes ago, EmirOfShmo said:

Oh, he didn't expect anything from anybody as part of the deal. All he wanted was the ability to buy the used car people were turning in to dealers. He couldn't buy the car from the customer (dealer gave them more $$) nor buy the car from the dealer (who had to destroy the car) after the trade-in. 

 

My buddy does have sales tax, property tax, & payroll tax. He co-owns a used car lot.

 

Fair enough, but it was only the presence of C4C that caused them to be traded in the first place.  Can’t lose what you never had.  The government brought the money and bought em up.

 

And yeah, I remember pouring silica into the head of a very clean late 80s XJ6 Vanden Plas. A very odd feeling.

 

 

[PeterMP]

An interesting idea:

 

http://gregmankiw.blogspot.com/2020/03/a-proposal-for-social-insurance-during.html

 

"Let’s send every person a check for X dollars every month for the next N months. In addition, levy a surtax in 2020--due in April 2021 or perhaps spread over several years--equal to N*X*(Y2020/Y2019), where Y2020 is a person’s earnings in 2020 and Y2019 is a person’s earnings in 2019. The surtax would be capped at N*X.

Under this plan, a person whose earnings fall to zero this year keeps all of the social insurance payments and does not pay the surtax. A person whose earnings fall by half keeps half of the payments and returns half. A person whose earnings remain the same (or increase) returns everything: They will have just gotten a short-term loan.

Of course, there is an implicit marginal tax rate in this scheme. If Y2020 is less than Y2019, each dollar of earnings in 2020 faces an additional marginal tax rate of N*X/Y2019. A hardcore supply sider might object. But at this moment in history, social insurance is more pressing than avoiding the distortionary effects of taxes. One might even argue that, considering the externalities associated with leaving home to go to work in this time of contagious pandemic, a higher marginal tax rate might be efficient.

For concreteness, let me put some rough numbers to this idea. (I am not recommending these particular numbers but using them to illustrate feasibility.) Suppose we send $2000 a month to every adult for the next six months. The adult population is about 300 million. We would send out $12,000 per person for a total of $3.6 trillion.

This staggering number, however, is not as scary as it seems. Because these payments would be short-term loans for most people, the net budgetary cost would be much smaller. The only people who would not repay the loans in full via the surtax would be those with reduced earnings in 2020. Let's say 25 percent of the labor force is unemployed for half the year (a very bad scenario). Then 40 million people would experience earnings declines of 50 percent. Their surtax would repay half the social insurance payments, resulting in their receiving net payments of $6,000 per person. For an unemployed person with usual annual earnings of $40,000, this $6,000 would replace 30 percent of lost earnings; the replacement rate would be higher for workers with lower usual earnings. In addition, the $6,000 short-term loan would help cushion the blow. The net budgetary cost would be only $240 billion, about 1.2 percent of GDP. This is surely feasible."

 

[CousinsCowgirl84]

Isn’t that basically what they are doing with the SBA loans?  I don’t think many democrats will vote for loans to citizens...

[Larry]

I've been fond of something that I read Italy did.  (What I read lacked a lot of details, so I made up a lot, which might be what Italy did, or might be what I made up.)  

 

They announced that all mortgages were suspended for 6 months.  

 

Now, the way I'd do that?  

 

1)  No mortgage payments are due for six months.  

2)  For those six months, the government will make interest only payments.  

3)  The term of every mortgage is extended by six months.  

 

The lenders still get their interest, on time.  And when the six months is over, the borrowers will have the exact same loan balance, and the same number of remaining payments, as they had before.  (And therefore, the same payments.)  

 

And the financial markets get six months of no defaults on all those loans.  

 

And all it costs the government is the interest on all those loans.  

 

There's a lot of people it doesn't help.  Renters.  (Although maybe a clause?  If the mortgage is on rented real estate, then the landlord is required to reduce the rent by an amount equal to the mortgage payment he's not making?)  But it seems to me that that could really add a lot of financial stability to a lot of people, while costing the government a lot less money.  

 

(And it wouldn't even help me.  My house is paid for.)  

Edited April 4, 2020 by Larry

[88Comrade2000]

The Recession Bread Lines Are Forming in Mar-a-Lago’s Shadow

[EmirOfShmo]

17 hours ago, TryTheBeal! said:

 

Fair enough, but it was only the presence of C4C that caused them to be traded in the first place.  Can’t lose what you never had.  The government brought the money and bought em up.

 

And yeah, I remember pouring silica into the head of a very clean late 80s XJ6 Vanden Plas. A very odd feeling.

 

 

 

Uhhhh, yeah, pretty much my point. LOL

[Larry]

15 minutes ago, Rdskns2000 said:

The Recession Bread Lines Are Forming in Mar-a-Lago’s Shadow

 

Remember Trump tweeting about how unfair it is that homeless people exist in laces where rich people can see them?  

[LD0506]

https://thenib.com/all-the-kings-rent/

[hail2skins]

The stock market took a big hit from the initial coronavirus fears, but despite the fact that we are still shut down, is rebounding much faster than many would've expected (despite still being roughly 20 percent below the all-time highs).  I know that a lot of that has to do with supposed less uncertainty now and the latest models indicating markedly less deaths than earlier feared, but still...…………….

 

I guess my question is, when does the other shoe drop from all this? We were expecting a recession anyway well before coronavirus hit. At what point does that "true" recession happen in terms of the stock market really being impacted to the tune of a 40-50 percent hit that it takes a while to dig out of?

[Cooked Crack]