"Stimulus Package"

[zt2211]

The United States House of Representatives has passed the partisan Stimulus Bill that has just come out of the conference committee. The bill contains spending in excess of $787 billion in taxpayer dollars, designed to help the failing economy. Any comments or opinions?

 

[Gausslander]

I believe it will work. Mark my words, he'll see it through.

 

[Hakeem]

You know, I really don't see how the entire world can have an economic crisis.

Imagine you and I are the only people on Earth. We both have the same amount of money. Two scenarios:

• You accidentally drop a large amount of your money into a bottomless pit.
  You are now poor compared to me.
• We both accidentally a large amount of our money into a bottomless pit.
  Both of us are now poor compared to... Each other?

 

[InfiniteSeven]

You know, I really don't see how the entire world can have an economic crisis.

Imagine you and I are the only people on Earth. We both have the same amount of money. Two scenarios:

• You accidentally drop a large amount of your money into a bottomless pit.
  You are now poor compared to me.
• We both accidentally a large amount of our money into a bottomless pit.
  Both of us are now poor compared to... Each other?

Still doesn't change the fact that you lost the money.

As for the stimulus package, I really don't know if it'll work. I hope it will.

Edit: Do I have to be poor compared to you? :3

 

[Zombie]

You know, I really don't see how the entire world can have an economic crisis.

Imagine you and I are the only people on Earth. We both have the same amount of money. Two scenarios:

• You accidentally drop a large amount of your money into a bottomless pit.
  You are now poor compared to me.
• We both accidentally a large amount of our money into a bottomless pit.
  Both of us are now poor compared to... Each other?

If you both drop the money into the pit, you will be poor compared to your previous living conditions.

I have no idea what this stimulus package is, since I live on the other side of the globe, but I hope it won't fuck up the global economy.

 

[brad.dude03]

That example doesn't really work.

Because in our world, the fate of everyone else is tied to the fate of the United States. When the US goes down, it's gonna drag a lot of people with it.

And as such, Banks from around the world pooled their finances back in September. China gave the US a loan. The rest of the world wants this Bill to work just as much as Obama does.

I think it will. The only problem is that the US will need to come up with the money for this loan on their own. They're using this money to buy up as much of the toxic debt as possible, to prevent everyone from losing money in their terrible investments in the subprime mortgages.

 

[Hakeem]

Do I have to be poor compared to you? :3

If we both have the same amount of money, how are either of us worse or better off than each other?

If you both drop the money into the pit, you will be poor compared to your previous living conditions.

How is that?


Suppose I have 47 conch shells and 19 snail shells. You have 26 conch shells and 67 snail shells. Which of us has more money?

 

[Zombie]

How is that?


Suppose I have 47 conch shells and 19 snail shells. You have 26 conch shells and 67 snail shells. Which of us has more money?

I don't get it. What does that have to do with the stimulus package?

 

[Blackscar]

I hope it will be use correctly and that it doesnt fall in to the wrong hands.

 

[Zombie]

I hope it will be use correctly and that it doesnt fall in to the wrong hands.

Oh no! Terrorists will steal our economic tax reformation system!

 

[Blackscar]

Oh no! Terrorists will steal our economic tax reformation system!

Ahah..

 

[zt2211]

In my opinion, the stimulus bill (and the "bailout" last fall under G.W. Bush) is a step towards socialism because it entails the government "giving" money from its citizens (taxpayer money) (or, at least, money borrowed from China!) to failing industries. We have been going down this road for a long time; just look at farm subsidizing.

Basically, I am a free-market supporter (as were the founding fathers), and I don't see how just giving out cash to companies is going to solve any problems. There is no incentive to do better, and government regulation has proven to be inefficient time and time again. Do we really want a socialist economy in the United States? I sure don't; the only winners in that scenario are the politicians and (tyrannical) Chinese interests.

By the way, I'm not being partisan here. Both Democrats and Republicans have been leaning toward socialization for a LONG time, and G.W. Bush was less economically conservative than Clinton. Obama will probably turn out to be more economically centrist than Bush was (which is a good thing, in my opinion). I'm only against socialism and communism, and I am for free market principles and less government interference (in both social and economic arenas).

 

[Gausslander]

In my opinion, the stimulus bill (and the "bailout" last fall under G.W. Bush) is a step towards socialism because it entails the government "giving" money from its citizens (taxpayer money) (or, at least, money borrowed from China!) to failing industries. We have been going down this road for a long time; just look at farm subsidizing.

Basically, I am a free-market supporter (as were the founding fathers), and I don't see how just giving out cash to companies is going to solve any problems. There is no incentive to do better, and government regulation has proven to be inefficient time and time again. Do we really want a socialist economy in the United States? I sure don't; the only winners in that scenario are the politicians and (tyrannical) Chinese interests.

By the way, I'm not being partisan here. Both Democrats and Republicans have been leaning toward socialization for a LONG time, and G.W. Bush was less economically conservative than Clinton. Obama will probably turn out to be more economically centrist than Bush was (which is a good thing, in my opinion). I'm only against socialism and communism, and I am for free market principles and less government interference (in both social and economic arenas).

Without these large companies the country would be severely damaged. Just look at China before Beijing and Shanghai went completely federalist.

 

[brad.dude03]

In my opinion, the stimulus bill (and the "bailout" last fall under G.W. Bush) is a step towards socialism because it entails the government "giving" money from its citizens (taxpayer money) (or, at least, money borrowed from China!) to failing industries. We have been going down this road for a long time; just look at farm subsidizing.

Basically, I am a free-market supporter (as were the founding fathers), and I don't see how just giving out cash to companies is going to solve any problems. There is no incentive to do better, and government regulation has proven to be inefficient time and time again. Do we really want a socialist economy in the United States? I sure don't; the only winners in that scenario are the politicians and (tyrannical) Chinese interests.

By the way, I'm not being partisan here. Both Democrats and Republicans have been leaning toward socialization for a LONG time, and G.W. Bush was less economically conservative than Clinton. Obama will probably turn out to be more economically centrist than Bush was (which is a good thing, in my opinion). I'm only against socialism and communism, and I am for free market principles and less government interference (in both social and economic arenas).

Without this supposedly socialist action by your government the entire country would collapse. Republican idiots everywhere protested the bailout by saying that the companies that couldn't survive should be left to die. This isn't a realistic possibility, because it would mean the complete and utter destruction of the US economy.

 

[Samuraid]

I normally don't post in politicallly-flavored threads (because debates on the internet are next-to-pointless), but this one is a bit more interesting.

If you want to know how the economic stimulus package will likely work, all you have to do is look at history. President Franklin Delano Roosevelt increased government spending unprecedented amounts during a previous huge USA recession. That, combined with World War 2, brought the economy out of the recession it was in. However, the USA is now over 6 trillion dollars in debt and we are still paying for it. So yeah, this will likely help, but a few generations down the road we'll be paying for it as well.

 

[Captain Griffen]

government regulation has proven to be inefficient time and time again. Do we really want a socialist economy in the United States? I sure don't; the only winners in that scenario are the politicians and (tyrannical) Chinese interests.

Sweden is a happy first world country. The USA is an unhappy and, in many ways, third world country. Go figure.

 

[Hakeem]

saying that the companies that couldn't survive should be left to die. This isn't a realistic possibility, because it would mean the complete and utter destruction of the US economy.

You know, you are probably right.


Somehow, that that is right seems wrong to me.

 

[brad.dude03]

Well, not really. You have to think about all the people that have their fates tied to these companies in some way or another. Whether they provide a third party service for the company, or whether they're directly employed, they're going to be fucked if it goes under.

It's not just about the companies. I'd love to see a lot of these greedy corporations go under, but you just can't, because the people tied to them will be screwed. And if you suddenly have millions of people without jobs, the economy will be even worse off.

 

[Hakeem]

Yeah, and that seems like a crappy situation to be in. We can't shut them down if we wanted to.

 

[brad.dude03]

I heard an interesting conspiracy theory today. One of the philosophy teachers in my school is adamant in his belief that all of the major problems in the Us as far back as September 11th, 2001, have been the result of oil, directly or indirectly.

So, for the economy, he claims that it the Saudi's, with their massive oil prices, that destabilized the economy, and used this as an excuse to buy up as much of the US as possible with their oil money.

And it's partially true, as far as I know, because the banks, before the US stepped in with this Stimulus Package, were either being bought up by or taking loans from, the Saudi's.

It's like fighting a war on a whole different level, according to him anyway.

 

[Captain Griffen]

Soo...the Saudis made us label sub-prime mortgages as the same level of risk as government bonds, and then lend excessively against it...? Because that's the current crisis's major cause, rediculous banking practices.

And OPEC's power over oil has always been used to manipulate it, so what? As for countries like Saudi Arabia buying up bits of America, there *has* to be capital flowing into the USA to fianance their current account deficit...which is powered by insufficient saving, excess borrowing.

 

[brad.dude03]

Like I said, wackjob conspiracy theory.

Subprime was the biggest cause, since the US aggrigated over a trillion dollars on toxic debt by not only creating these subprime mortgages, but allowing people to invest into them, some of them with safety ratings higher than government bonds.

It's funny, because all of the credit agencies in the States gave subprime investments great risk levels, but the only credit rating association in Canada wouldn't even touch them. As it was, because of asset backed commercial paper Canadians still got screwed out of 32 billion.

 

[3rgytr54]

I have to put my in my 2 cents--

I believe that there is no way there can be a global recession, because people still need stuff. Like Hakeem (?) said-

But on the other hand, if businesses go out of business, someone who is start will say "I can capitalize on this moment and start a new business" look at before WW1 is the U.S, monopolies will spring up and it won't hurt immediately. But after time it might have some downing affects which can be fixed at that point, i believe this stimulus does NOTHING for the average American, and won't help forecloses/ or anything else for that matter, and I'd rather be wrong about that.

 

[brad.dude03]

The fact that people need stuff doesn't mean they have a demand for it.

Demand has two principles:
The desire to buy the product
The means to purchase the product

Demand doesn't exist if the person doesn't have the ability to pay for it, no matter how much they want it.

When people don't have access to credit, they don't have the means to pay for things. When these people, Americans, Brits, Canadians, anyone, can't buy things, the companies that make these things cut jobs. When people lose their jobs, the economy begins to deteriorate. This then affects the overseas spending, because trade is reduced, the government doesn't have money, the companies don't have money, everybody loses.

A global recession is very real and happening right now. In every crisis comes opportunity, but this crisis seems to be just that, a crisis. You can't capitalize on anything right now, because people don't have access to the credit they need to start making the major transactions that would get the economy rolling again.

This is partially the bank's fault. The banks in the US went from extremes: A loose-money policy, in which credit is easily available (Far too much so in the case of the US, giving out 400 thousand dollar mortgages to people without any ability to pay it off), to a Tight-money policy, in which the banks have the money stuffed in a vice grip, and nobody can get to it, regardless of credit ratings.

In order for begin the revitalization, credit needs to be available. Classical (Keynesian) Economics tells us that increased spending and decreased taxation is the method of ending a recession. And Keynes was right, period. Where do you think this money will go? Not to the taxpayers, that would be stupid. Giving them free money will only do so good, their spending will go to waste. No, instead, put the money toward public works, bridges, roads, all kinds of projects sponsored by the government that both creates wages, employment, and gets something useful done. It employs the people making the raw materials, the steel mills for the bridges, etc, employs the construction workers, it gets the economy going again.

That's where this stimulus package is going. You don't stimulate the economy by handing out a tax rebate. You buy up as much of the toxic debt as you can (Buying up the bad investments in the subprime mortgages) so that the banks don't go under, and then put the rest toward creating jobs.

Economics. It tells you these things.

 

[3rgytr54]

I half way know my economics- but wouldn't somewhere be rollin' in it if every where else wasn't?

But 99.9999999999999% of people have a desire to buy something, whether it be food or a pair of shoes, the means is always there, it just has to be found. I can't see how restaurants are hurting, because this one was HIRING, +jobs=more money--->leads too---> means to purchase. ( I hope no one is going to tell me that other industries aren't doing ok, some are laying off, laying off s a means to purchase- its different from being fired

 

[Captain Griffen]

Classical (Keynesian) Economics tells us that increased spending and decreased taxation is the method of ending a recession.

*cough*Keynesian*cough*

Not at all Classical. Classical says "it'll sort itself out". Otherwise pretty much, yea.

I half way know my economics- but wouldn't somewhere be rollin' in it if every where else wasn't?

Obviously not come to the credit multiplier yet...or banking at all, if that's the case. And if you know nothing about even the most basic macroeconomics to do with the banking system...why are you commenting on a banking sector led crisis?

 

[brad.dude03]

I've always been taught that Keynesian/Classical economics are the same. Until very recently, Keynes views on Economics were thought of us 'classical', as in outdated. I've always had high regard for Keynes because he's a pro, but now everyone agrees that he was right all along and that we should listen to his ideas if we ever want to get out of this mess.

 

[Captain Griffen]

I've always been taught that Keynesian/Classical economics are the same. Until very recently, Keynes views on Economics were thought of us 'classical', as in outdated. I've always had high regard for Keynes because he's a pro, but now everyone agrees that he was right all along and that we should listen to his ideas if we ever want to get out of this mess.

Classical economics is most definately not Keynesian economics. Classical is older than Keynesian. Around 1930s onwards Keynesian rose, replacing Classical, pretty much fully only during and after WWII, then 1970s it pretty much fell to Neo-Classical. And hey, now we're all Keynesian again!

 

[brad.dude03]

Yes because it turns out Keynes was right all along. Imagine that.

 

[Captain Griffen]

10 years time: Hey, it turns out Friedman was right, and Keynes wrong!

Each just had models, which are good at different times, as they have different assumptions.

 

[3rgytr54]

The person who is right about something (about certain things, like this) is the one who's evidence is most recent or there is no competitor.

 

[brad.dude03]

There are many competitors, and his evidence sure as fuck isn't recent.

He's just one pro-ass Economist.

 

[3rgytr54]

I forgot the most important two: The one you stand behind, and the one you have and an amount of information from.

 

[Hakeem]

When people don't have access to credit, they don't have the means to pay for things.

Am I reading that right? Particularly "credit"?

When these people, Americans, Brits, Canadians, anyone, can't buy things, the companies that make these things cut jobs.

I'm pretty sure there are alternatives.

When people lose their jobs, the economy begins to deteriorate.

Now, if the companies are firing people, then those people were not necessary to the ability of the company to produce its good or service. This only means there are less people with jobs, and that is not a problem as long as the jobs that need to be done, are.

This then affects the overseas spending

Okay, but in reference to a global crisis, we were never trading with extraterrestrial economies.

because trade is reduced, the government doesn't have money

The money of the complete economic system comprising the world does not get money from anywhere other than itself. Unless we have physically rid ourselves of large amount of currency, we do not have less money as an entire system. Even were we to do that, currency only has value that we assign it, so the value of the total currency does not change. Since the amount of currency changed, currency changes value.

If the government goes bankrupt because it isn't trading with other countries, we were in deep water to begin with. That's another issue, because a government is an isolated system in reference to the global economy.

Taxes?

the companies don't have money

How's that? Did they burn it all?

A global recession is very real and happening right now.

Only as real as we make money.

 

[3rgytr54]

Right on.

Also, this is made out to be worse than it is. When Joe the plumber looks at the headline

ECONOMY GETS MORE DIRE

he thinks "wow, that's not good." and closes that paper. Headlines stick.

Example: (headline different from the story)
(was in the local paper)
"BRISTOL REGRETS PREGNANCY"

(-half the story-) ..."So, do you regret anything about this experience?"
"No, I don't regret anything... (something something...)" (-the other half-)
(I'm not sure on the exact words, but these are close- I skimmed it.)

In other words, if you just read that headline, and didn't read the article, you would have taken the headline for what it says and said something to someone sometime. People just don't not talk.

EDIT: and now that I read your post again Brad, where did the money go? I know it didn't inflate much, if it was caused by the decline, then where did the money value go up?

 

[brad.dude03]

Except things actually are dire since the US has 1.3 trillion dollars in debt that will never be paid off that is being bought up by the US government thanks to the subprime mortgage crisis.

You also have that aforementioned crisis to thank for the collapse of your housing industry.

To top it all off, the banks are now ruling their credit with an iron fist, so availability is very difficult. Without credit the major transactions that fuel the economy cannot be made, such as purchasing things like housing, vehicles, etc, and other large scale purchases.

 

[Dreadnought[dA]]

Saving a failing company is promoting bad behavior. Letting a failing company die is demoting good behavior for a lot of the workers. Lose lose situation.

Either the government takes control of the companies to ensure their survival, or we lend money with strings attached and the companies find a loophole for there CEOs to get $10,000,000 BONUS! If the government does take control, we need to pay more taxes for the government to work. If the government lends(wastes) money then we have to pay more taxes. Lose lose situation.

Basically the U.S. economy is doomed to die if not the world.

Obama has already shown his inexperience in thinking that republicans would cooperate.
He wants republicans and democrats to work together... towards democratic goals.
Basically I've lost all faith in all governments. They are giant pieces of shit that fester and perpetuate themselves through greed. In other words, the world is full of shit.

Sorry if I didn't say anything really intelligent, but I thought I'd share my opinion on the matter.

 

[Captain Griffen]

ANow, if the companies are firing people, then those people were not necessary to the ability of the company to produce its good or service. This only means there are less people with jobs, and that is not a problem as long as the jobs that need to be done, are.

Production in a company is not booleanic.

The money of the complete economic system comprising the world does not get money from anywhere other than itself. Unless we have physically rid ourselves of large amount of currency, we do not have less money as an entire system. Even were we to do that, currency only has value that we assign it, so the value of the total currency does not change. Since the amount of currency changed, currency changes value.

Wrong. Physical currency is only a very small part of even the narrowest definitions of money. And the money supply most definately has collapsed; in addition, so has the investment levels, which may well have put us into a liquidity trap, particularly with low inflation expectations (nominal interest rates cannot fall below zero; if the equilibrium nominal interest rate is below that, the money markets won't clear, and bad shit happens, as the stablisation mechanisms normally present don't kick in).

 

[brad.dude03]

Saving a failing company is promoting bad behavior. Letting a failing company die is demoting good behavior for a lot of the workers. Lose lose situation.

Either the government takes control of the companies to ensure their survival, or we lend money with strings attached and the companies find a loophole for there CEOs to get $10,000,000 BONUS! If the government does take control, we need to pay more taxes for the government to work. If the government lends(wastes) money then we have to pay more taxes. Lose lose situation.

Basically the U.S. economy is doomed to die if not the world.

Obama has already shown his inexperience in thinking that republicans would cooperate.
He wants republicans and democrats to work together... towards democratic goals.
Basically I've lost all faith in all governments. They are giant pieces of shit that fester and perpetuate themselves through greed. In other words, the world is full of shit.

Sorry if I didn't say anything really intelligent, but I thought I'd share my opinion on the matter.

I'd love as much as the next guy to let these greedy fat corporations rot in hell, but you have to think about the poor innocent people that get stuck working for them. If you let these corporations collapse, all of these honest working-class citizens, white collar managers, and fatcat executives, would be without work.

The executives can rot in hell as far as I care, but the rest of them are generally good people who don't deserve to lose their job.

Yes, this will one day lead to a better economy, but at what cost? The cost is too high just to let these companies go.

 

[Dreadnought[dA]]

What was the limit set at for CEO's pay?

 

[zt2211]

I still say that the free market economy is the way to go. Why do we need the government to bail out the companies? The people who run the companies (the stockholders) should take responsibility for their actions. If a company is going to fail due to its previous choices, then it should fail.

You may say, "We cannot afford to have these companies go under." We can't? Do you have no faith in the free market system? If there is a consumer demand for a product, an entrepreneur will find a way to supply it. Competition will bring down prices to an acceptable level.

Finally, a free market system always has ups and downs. It is a natural cycle, one which actually cleanses the system, getting rid of inefficient elements in various industries and creating new opportunities upon a recovery. The trend is always upwards during peacetime, so overall the market will provide more wealth. Remember: wealth is only limited by Newton's Second Law of Thermodynamics (that is, wealth is virtually unlimited but would eventually run out after countless millennia because the universe is becoming increasingly chaotic due to the concept of entropy).

My point is, government bailouts will not "save" the economy; at best it will delay the effects of the downturn at the cost of terrible inflation and debt to a hostile, Communist nation (China, and yes, it is Communist and hostile).

 

[Captain Griffen]

I still say that the free market economy is the way to go.

Free market fails when markets won't clear. See above about liquidity trap.

You may say, "We cannot afford to have these companies go under." We can't? Do you have no faith in the free market system? If there is a consumer demand for a product, an entrepreneur will find a way to supply it. Competition will bring down prices to an acceptable level.

Oh really? In the long run, when we're all dead, maybe, but in the short to medium term if you let them go under, the economy will be massively disrupted; no one would want to take the risk to setup to try and replace them, the US deficit would go worse as people import, and as the US government lost tax revenues and automatically increased spending (due to lower employment)...and if that were to happen I have doubts over whether the US could maintain its debt. If people start thinking it cannot, then what we are currently in will look like a walk in the park.

Finally, a free market system always has ups and downs. It is a natural cycle, one which actually cleanses the system, getting rid of inefficient elements in various industries and creating new opportunities upon a recovery. The trend is always upwards during peacetime, so overall the market will provide more wealth. Remember: wealth is only limited by Newton's Second Law of Thermodynamics (that is, wealth is virtually unlimited but would eventually run out after countless millennia because the universe is becoming increasingly chaotic due to the concept of entropy).

My point is, government bailouts will not "save" the economy; at best it will delay the effects of the downturn at the cost of terrible inflation and debt to a hostile, Communist nation (China, and yes, it is Communist and hostile).

You're missing the cause of the crisis.

 

[Hakeem]

Without credit the major transactions that fuel the economy cannot be made, such as purchasing things like housing, vehicles, etc, and other large scale purchases.

So the fuel to the economy is money that does not exist? Interesting.

If you let these corporations collapse, all of these honest working-class citizens, white collar managers, and fatcat executives, would be without work.

I'm willing to do that. I'm sure they can get jobs elsewhere.

no one would want to take the risk to setup to try and replace them

That is so totally accurate I cannot begin to express how totally true and obvious it is now that I think about how stupid someone would have to be to do something that is very profitable.

 

[brad.dude03]

No, they wont, because your country would spiral into the worst depression it ever had. It's hard enough for people to hang onto jobs now, in the present climate, and this is with the government doing everything that it can to hang on to jobs.

It just wouldn't be feasable at all.

 

[Captain Griffen]

So the fuel to the economy is money that does not exist? Interesting.

Yes, well done, go look up the credit multiplier.

I'm willing to do that. I'm sure they can get jobs elsewhere.

Nope. And sticky wages mean the market won't clear in the short-med term.

That is so totally accurate I cannot begin to express how totally true and obvious it is now that I think about how stupid someone would have to be to do something that is very profitable.

As brad points out, in the current climate, no, plus they'd never be able to get the funding.

 

[Hakeem]

If you think nobody is willing to try, then I can't convince you anything would work now can I?

There are people that will try. I can assure you this as I can assure you I am typing this message.


What part of spending money you don't have makes anything work?

 

[Captain Griffen]

If you think nobody is willing to try, then I can't convince you anything would work now can I?

There are people that will try. I can assure you this as I can assure you I am typing this message.


What part of spending money you don't have makes anything work?

Assuming that the velocity of money is constant and prices are sticky in the short run, then everything.

 

[3rgytr54]

Since when has economy ever been part of the government here? (not including monopolies and such) Talking about buying 40% of Citi, and "bank bailouts" since when do banks not have Joe Schmo's house loan's $300,000 in some vault somewhere? The money in this country just didn't go "poof"

 

[brad.dude03]

No, it didn't. It was gone for a long, long time before anyone even noticed. In economies that are developed enough to rely on credit, you don't need money, you need the appearance of money. When banks are handing out money left right and center, it begins to disappear very, very quickly.

When these loans can't be paid back, the money disappears. It becomes debt. Debt that nobody wants to touch. There's about 1.3 Trillion worth of toxic debt in America alone.

That's where your fucking money went.

 

[Samuraid]

The funny thing all along is that money itself is an "appearance of money". It used to be backed by valuable material, (gold, silver, etc.) but now it simply has value because the government says it does. It's really just one huge pretend game; a fact which I find funny and disturbing at the same time.