Economics Thread

In terms of economic response, we should be thinking along the scale of WWII. Federal deficit as % of GDP in 1942 was 12%, in 1943 26%, in 1944 21% and in 1945 20%.

20% of 2019 GDP is about $4 trillion.

Number of households is 130 million.

4 trillion divided by 130 million is about $30,000

So there ya have it.

We are at war with a virus.

We should do as we would during wartime to support the economy.

Instead of paying people to build tanks and fighter planes, we can send each household $30,000 to build pseudo-tanks.
 
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Timing is everything. Even for someone like Andrew Yang who was just slightly ahead of his time.

Just to extend the analogy I made with WWII a little. People who were working in factories producing tanks and fighter planes and everything else during World War II didn't have much in the way of consumer goods to spend on. There was rationing. They bought war bonds and deferred consumption.

Similarly, people right now are hunkering down at home and restaurants are closed. They are also deferring consumption. But with the right amount of stimulus you can unleash a strong recovery once life returns to normal. The big risk is that the lost income currently being experienced by restaurant workers (and many others) leads to a downward spiral (the multiplier effect working in reverse) that carries over even after some of these emergency measures are lifted.
 
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thethe said:
If you think the markets care about trumps words for this you are dreaming. Investors are seeking the virus ravage europe and are uncertain how many seed infected have been planted around the US.

No response could have addressed this issue. Social distancing is the only cure for such a contagious virus.
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You just said in another thread that the Dow went up because of Trump's speech.
 
Uh oh. Mnuchin to be fired or resign by the end of the week. You aren't gonna make the markets happy and Donald happy by saying things like this.

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The market is unimpressed with T's efforts to support it. At this rate he'll be eating into Obama's gains before long.

While some of the Fed's moves will help to improve market functioning, the rate cuts themselves amount to a grand — but empty — gesture that the markets have already judged to be pointless.

In less than two weeks, the Fed has thrown away the rate hikes that took it more than two years to painfully push through from 2015 to 2018. In a few months, when the economy is struggling to recover from the pandemic and could badly use a boost from the Fed, it will have no more rate cuts to offer. Having stepped on the gas on the road to Japanification, the Fed has now floored the pedal. By exhausting its rate-cut ammunition, the Fed has doomed itself to irrelevance, a predicament it will stay in for years to come.
 
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https://www.nbcnews.com/politics/co...s-under-treasury-department-proposal-n1163016

Extent Socialism

The two rounds of direct payments to taxpayers, each a total of $250 billion, would be sent on April 6 and then the second round would be sent on May 18, according to the proposal. They would be tiered payments, with the amounts based on income level and family size, the proposal says. Both payments would be for the same amount.
 
The Chosen One said:
https://www.nbcnews.com/politics/co...s-under-treasury-department-proposal-n1163016

Extent Socialism

The two rounds of direct payments to taxpayers, each a total of $250 billion, would be sent on April 6 and then the second round would be sent on May 18, according to the proposal. They would be tiered payments, with the amounts based on income level and family size, the proposal says. Both payments would be for the same amount.
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Seriously, it is the right idea, but it will have to be much bigger.
 
A bailout that dossnt focus on the america worker is a bad one. Let companies figure it out by going through bankruptcy.

Help the industries most directly impacted such as travel and hospitality.

But most importantly help workers and small businesses.

Whoever fails after that fails and then the free market will correct it over time.
 
thethe said:
A bailout that dossnt focus on the america worker is a bad one. Let companies figure it out by going through bankruptcy.

Help the industries most directly impacted such as travel and hospitality.

But most importantly help workers and small businesses.

Whoever fails after that fails and then the free market will correct it over time.
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Yeah I agree. At least two thirds should directly go to individuals. I would use some for small businesses such as restaurants. They don't have access to capital markets.

Big companies like airlines, I would not help. They can go restructure through a bankruptcy process if necessary. Their basic capacity (physical stock of planes, landing rights, etc) is not going to go away. Small business or restaurant might never reopen.
 
nsacpi said:
Yeah I agree. At least two thirds should directly go to individuals. I would use some for small businesses such as restaurants. They don't have access to capital markets.

Big companies like airlines, I would not help. They can go restructure through a bankruptcy process if necessary. Their basic capacity (physical stock of planes, landing rights, etc) is not going to go away. Small business or restaurant might never reopen.
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Plus they can refinance now at absurdly low rates and use hedging to guarantee some baseline of interest expense in the future.

We cannot repeat the mistakes of the past. If a major corporation cant last for 6 months based on their legacy operations then either management is awful or the business wasnt legitimate ling term.

Small businesses and american citizens are the key to getting this right.
 
The analogy we need to keep in mind is this.

Tanks are useful during a war. Their main utility lies in their ability to kill enemy tanks. Social distancing is useful during a pandemic. It's only utility is disrupting the spread of the virus.

We pay people to make tanks. It helps the economy to do this. Similarly, we need to compensate people for social distancing and other steps they are taking to defeat the virus.

Think of tanks and social distancing as two different kinds of weapons for two different kinds of wars. It doesn't make sense to pay for one and not the other.
 
Rubber Meets Road :


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who knew ?

The above shows that bringing the economy to its knees can/could and should be a political tool of working America - opening the door for future national strikes.
Seems far fetched but … so have a lot of things the past 3 years
 
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thethe said:
Plus they can refinance now at absurdly low rates and use hedging to guarantee some baseline of interest expense in the future.

We cannot repeat the mistakes of the past. If a major corporation cant last for 6 months based on their legacy operations then either management is awful or the business wasnt legitimate ling term.

Small businesses and american citizens are the key to getting this right.
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Something we actually agree on.
 
We're in save the economy mode right now. Anything and everything should be on the table. Hopefully enough can be done so that we can avoid the worst case and most painful decision. Letting older people die to save the younger folks.
 
nsacpi said:
In terms of economic response, we should be thinking along the scale of WWII. Federal deficit as % of GDP in 1942 was 12%, in 1943 26%, in 1944 21% and in 1945 20%.

20% of 2019 GDP is about $4 trillion.

Number of households is 130 million.

4 trillion divided by 130 million is about $30,000

So there ya have it.

We are at war with a virus.

We should do as we would during wartime to support the economy.

Instead of paying people to build tanks and fighter planes, we can send each household $30,000 to build pseudo-tanks.
Click to expand...

Bernie calling for sending $2000 to every person every month while we are dealing with the pandemic. I agree!
 
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