tag:blogger.com,1999:blog-2882378175886697699.post5193937275442857495..comments2023-06-25T07:54:12.252-04:00Comments on I married a communist: Tax payers lost 700 billion in one drunken pull of the roulette wheel...HumanProjecthttp://www.blogger.com/profile/03579380219478093167noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2882378175886697699.post-57855155686991496312009-01-19T17:55:00.000-05:002009-01-19T17:55:00.000-05:00HumanProject,I can't believe you read all that! Wh...HumanProject,<BR/>I can't believe you read all that! When do you have the time??? Are you sure you're not a MachineProject? :-)<BR/><BR/>Seriously though, how long before the Google Translator gets adapted into a blog comment answerer? Then people like me who have less-than-soul-nurturing jobs will have a nice, continuous outlet.<BR/><BR/>Anyway, you're right about the interest and the servicing of the loans. The trick is to lend at a higher rate than you borrow, and you use the excess interest to cover losses. Which is why credit cards have a high interest rate (lots of losses to cover) and yacht loans have a low rate (almost no losses, believe it or not).<BR/><BR/>My macroeconomic training consists of playing the old sim game where you were the king and you decided how many crops to plant and how much to tax the villagers. What was that called? Now that you know this, you may stop reading...Danhttps://www.blogger.com/profile/01781132745363795745noreply@blogger.comtag:blogger.com,1999:blog-2882378175886697699.post-59170650877877513032009-01-19T12:31:00.000-05:002009-01-19T12:31:00.000-05:00Dan, There are some really helpful points here, th...Dan, <BR/>There are some really helpful points here, thanks. I am actually not as nervous about impending doom as I was after being jacked up by Hightower's over-the-top screed.<BR/><BR/>Re: "that would create a panic and people would pull out money from those institutions" <BR/><BR/>--> I agree, it would have been helpful for Hightower to make a nod in this direction. <BR/><BR/>"The interest collected is supposed to make up for the institutions that can't repay.... In that case the government loses nothing, so in the end no money spent." <BR/><BR/> --> I thought interest is collected to "service the loan," because the US government also has to pay interest on loans that it has taken out, so it is losing if it doesn't collect the interest on money it lends. <BR/><BR/>"paid to read this??? And then violated his copyright" <BR/><BR/>--> Oh, but Jim's so fun. I discussed the issue with my conscience and decided that I've been helping Hightower as a loyal annual paid subscriber for several years now, so he wouldn't grudge me *one* post which serves to extend his message. If he sends me a cease and desist letter, a post is easily deleted. <BR/><BR/>"Certainly in the trillions, you're not really giving money out, you're changing the economic playing field." <BR/><BR/>--> Its a difficult game for me (and others?) to wrap our brains around. Maybe growing up playing economic simulation games (e.g., SimCity) can help the current generation of economists (and you?) to readily perceive sophisticated patterns in this complex dynamical system. <BR/><BR/>"The Tom Ashbrook comment, that's just racist rabble rousing...Surprised NPR is doing the FOX thing" <BR/><BR/>--> Yeah, you're right. He didn't think through all the implications. Ashbrook has a hard job (2 hour-long shows a day, 5 days a week).HumanProjecthttps://www.blogger.com/profile/03579380219478093167noreply@blogger.comtag:blogger.com,1999:blog-2882378175886697699.post-16442571132533136122009-01-15T14:42:00.000-05:002009-01-15T14:42:00.000-05:00Indeed, it is discouraging that there isn't more t...Indeed, it is discouraging that there isn't more transparency. The powers-that-be say it's because, if they were to tell you who needed the money, that would create a panic and people would pull out money from those institutions, more than undoing the benefit of the money that was just put in. Makes sense to me. <BR/><BR/>The biggest misunderstanding is that the money was given away. It wasn't: it was lent. Sure, if you were to lend Mr. Madoff $700 billion, you may not see it back. Hopefully Bank of America, for example, is run a little better (it does have America in the name, you know). If you were to build your highway, it wouldn't be a loan to the construction companies. If you're paying for healthcare, it's not a loan to the doctors and hospitals. <BR/><BR/>The way bankers think about loans is that there's a chance some of it won't be paid back. To the extent that loss exceeds the interest others are paying, you have a net loss. The interest collected is supposed to make up for the institutions that can't repay, so the whole $700 billion gets paid back. In that case the government loses nothing, so in the end no money spent. It's a liquidity crisis tool, not credit support, as they say. <BR/><BR/>Now, there's some more complications when Treasury lends money, and what that means to the money supply, etc., but that's beyond me. But yeah, feel free to vote for a congressman who will promise to spend the next $700 billion on mag-lev trains. <BR/><BR/>On the other hand, the $825 million economic stimulus being put forward now is not loans, it's actually government spending and tax cuts (which will all have to be paid back later with tax raises, no? Unless we screw the Chinese, see below). <BR/><BR/>The Jim Hightower comment is missing the forest for the trees (someone paid to read this??? And then violated his copyright by quoting it. Nice). OK, fees go higher. That's the least of your problems. The alternative? You can't take any of your money out of these smaller banks, it's all gone. Which do you pick?<BR/><BR/>8 followed by 12 zeros. Is that worse than 9 zeros? What does it mean? At some point giving money out like that loses its meaning. Certainly in the trillions, you're not really giving money out, you're changing the economic playing field. Will you be taxed for $8 trillion? That's, what, $30,000 per US taxpayer? Don't worry, you won't have to pay for it. First, it's loans, not spending, second, the Chinese will cover it (see below :-). <BR/><BR/>And the Tom Ashbrook comment, that's just racist rabble rousing. Read your comment again: the Saudis invested in our banks, and now they're getting money. OK, they put money in, and now they're getting their money out, most likely at a fraction of their investment. What's so evil about that? We should encourage all foreign countries to invest in America, and pay them back years later at a fraction of their investment. That's how we can afford to pay those banker bonuses and buy flat-screen TVs. It's how the Japanese lost their shirts on Rockefeller Center, and how the Chinese are going to go bust on American government bonds. But if they didn't do it, we wouldn't have the money to spend on the stuff they make, which pays for their workers, so they can buy things, and save, and create money that they can use to buy Rockefeller Center again, etc.. In the meantime every American has a nice car, and is looking forward to that 4-mile-wide highway. Surprised NPR is doing the FOX thing.Danhttps://www.blogger.com/profile/01781132745363795745noreply@blogger.com