The FED bought Trillions of dollars of debt from the banks and they will soon buy more. Yet it will NEVER filter into the real economy nor reduce the debt-load of asset holders. THE FEDS MONEY WILL NEVER HELP THE ECONOMY
I HAVE A PLAN that would BAIL OUT EVERYONE and not JUST BANKS.
GIVE EVERY HEAD OF HOUSEHOLD ONE MILLION DOLLARS. That’s right. There are provisos that I’ll describe in a second.
WHAT ABOUT INFLATION? WON’T A LOAF OF BREAD COST $3000? In the Wiemar Republic and Uganda there was rampant inflation because the money printing was injected everywhere. Everyone got their hands on the newly printed cash and everything was wildly diluted.
WHY ISN’T THAT HAPPENING TO US NOW? You’ll hear many old timers talking about how money printing will assure rampant inflation. It just is not so in this circumstance. You see, the dilutive digi-money created NEVER SEES THE LIGHT OF DAY into the real economy. IT STAYS LOCKED IN THE CLOSED LOOP OF THE ASSET BASED FINANCIAL SYSTEM. The only inflation suffered is through the rising prices of commodities due to the forced search for return because of ZIRP.
So, give everyone a million dollars under the following conditions:
YOU CANNOT SPEND THE MONEY. IT IS ONLY USED FOR THESE FOUR REASONS:
Mortgage debt. Credit Card debt. College debt. Medical debt.
YOU CANNOT USE THE MONEY FOR ANY OTHER REASON.
Do you see what this does? It is not inflationary because the money does not flood the system. IT IS ALL PAID TO BANKS except the healthcare part.
SO INSTEAD OF ALLOWING JUST BANKS TO DE-LEVER YOU ALLOW THE CONSUMER TO ALSO WIPE THE SLATE CLEAN.
This is unprecidented. It will be called Socialist to the extreme. It will be called ridiculous. But do you have a better way to de-lever individuals, small businesses and banks all at the same time? Especially when the FED will give away trillions anyway?
ADDENDUM: All debt must have been incurred BEFORE January 1, 2012.
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I need to take on a ton of debt before this happens…off to the mall!
The FED is not this smart and then you have the moral hazard issue.
Moral Hazard? HOLY SHIT, that ship has sailed!
Hasn’t sailed as far as individuals are concerned. Here are two issues with your proposal:
1. Responsible savers would essentially be funding the lifestyles of those who have lived irresponsibly.
2. What’s to stop those who benefit by such a program to get themselves into debt again? Someone can use the funds to pay a $20,000 credit card bill and then take a trip around the world using a credit card.
My idea is to let any person or institution that can’t pay it’s debts fail and let those who lived responsibly or healthy companies buy up the assets of the failures at pennies on the dollar.
That’s the way system should work.
“hasn’t sailed?”. Autocorrect messed me up and I don’t know wtf I wrote…lol
Exactly. There is a reason we give the gun toting bank robber life in prison. Everyone could do that. The clam went on teevee to explain that “gods work” is the ability to give credit. The plebs are to be grateful for the chance at a credit card without which we would all perish into blazing balls of fire. God’s work is stressfull.. Scott has gone off the reservation with this one. Possibly.
Mr Bleier is playing the devils advocate. Confidence is the only rule that matters. No one will have confidence in a system that bails out the small pleb. Bailouts are for the rule makers only. The citizens have accepted that reality. So it will always stay that way.
I Like it. The only downfall would be O being guaranteed another 4 years.
lol. i like it.
I like it. I’d get a credit card, and as much MA, V, and DFS I can get my hands on without my earmarked credit card money. As fucked up an idea it would be, it kinda works in theory.
Would cause massive inflation….previous consumer dollars servicing that debt would now flood into the economy.
Agreed. Also the uber wealthy are loaded with debt. Would there be a poor man only clause in this plan? Hard to see the political will capable of such a thing. Who would benefit?
Nope. Money dissapears just like it was created; into thin air or as a journal entry…
Let’s say Joe has after-tax take home pay of $10k per month for the sake of round numbers. Joe has $7k per month in various debt payments. Thus expendable income is $3k per month
After the magic fairy dust is sprinkled across the land, the $7k goes away but Joe still has his $10k income. Joe’s expendable income just went from $3k per month to $10k per month.
Joe is going to make it rain and there is your inflation source.
I wondered why I had to get this far down in the comments before someone brought up the obvious flaw in this idea. Well done, buggy.
Well done, huggie… fuckin’ iPad auto-correct.
As always a thought provoking post. Hard to imagine the ultimate lifting of the curtain on the ponzi would not have some repercussions but anything is possible.
I suggested something similar on thereformedbroker blog. Fed funds given directly to the populace. Instead of the populace actually getting the cash, the populace tells the Fed to which creditor the funds should be directed. For those who have no debt the funds would instead go into an IRA. Wouldn’t have to be some outlandish amount either. $20K per tax paying household would be more reasonable.
Can a single person get relief as opposed to “head of household”?
maybe use the $ for mortgage debt, or for downpayment on purchase of a home, or fund a college savings account or healthcare savings account. If wife and I split do we get a $Mil each?
Exactly. Moral hazard does exist in the ghetto. Why? Everyone that has lived in one knows how full of shit everyone is. All of your questions are mute when no one believes the bullshit. Does one get a milli for goin to college ten times under ten different names?
moot, my good man. moot.
A good start but several tweaks seem needed.
First, you can never ensure the million bucks gets spent on just debt and medical. You would simply have to have the equivalent of debt forgiveness with the government writing the check to the lenders or medical providers. most ppl are not a million in debt so this way is less expensive.
Second, there has to be a means test. somewhere between 250k -$1M in gross income on last tax form. If you made $5M last year and you have debt, pay it. this would not include medical though. any and all would be eligible for that relief.
Otherwise it was the plan that should have been done all along. The TARP money alone would have done this eight years ago.
I’m not sure where one digs out ideas as bairbrwined and inane as giving away a jackpot to every American Idiot who didn’t have enough sense to spend within their means for the last twenty years, but I do hope your plan is presented in the heir of satire and not frankly your best shot. It’s like the inversion of Jonathon Swift’s “a modest proposal” but instead of selling carcasses of children to the wealthy’s menu selectiion, you’re suggesting turning air into food and handing it out to the inferior. I mean, jfc turned nothing into god, and we all know how that turned out.. Giving a million dollar tax break to every undeserving tom dick and mary is not the stimulus this sob-country needs. No amount of currency or coin can fix the States divided. The determined minority will, again, drag this nation to a place with bright futures and endless gains. As soon as the bullheaded bankers lay down their ego and fade out of the damned way.
I’m awaiting for your suggestion on how to work off the stifling debt that must be eliminated before the economy can return to “normal”
Agreed about moral hazard, and the ship’s departure.
My view is the powerful financial institutions will not support this and would insure it does not happen.
The “powers that be” would rather ultimately foreclose on debt and end up owning millions of hard physical assets. It is better to squeeze the debtor, and convert millions of mortgage holders into permanent renting class.
It is all about servitude of the masses. House ownership by the public is a thorn in the side of the powerful financial lords.
Have you heard the commercials for the PNC virtual wallet, and other similar products? “They” would like to process, skim, data mine and act as gatekeeper for the entire cash flow of customers. And make it easy to spend EVERY CENT each month on consumer crap.
“They” want your hard assets, not your silly debt paid off.
http://www.youtube.com/watch?v=L2tWwHOXMhI
Also- if/when the big mortgage banks can figure out a way to profitably manage millions of rental properties, I think this is a done deal.
Their government partners will be fine with this, because if everyone except the wealthy are renting class, living paycheck to paycheck (monitored and minded by the banks) the fix is in.
The efforts of the central banks insure eventual debt default by the “little people”.
Take away posession of hard physical assets, and complete control is achieved.
Well said. The 2008 carpet bagger scam that rivals any in history. Loan to them blow them out buy on the cheap with their money. Epic.
Man that would be awesome!
Then I would drink Kennedy style!!
If only there were some sort of default process we could utilize to delever the system
Stop smoking that weed!
I’d bet my million that this would actually work. We have both sectors, public and private trying to save at the same time. The result of this has always been disaster. Somebody has to give, either govt. or the common man. Somebody has to start spending while the other sector saves.