This may sound like an absurd Idea, and maybe it is, but here goes

[ThomWV]

With a very real threat of deflation on people's minds and a dollar based on an economy so flaky that not even we, let alone the rest of the people on the planet, know what its real value is there may be a simple way to quickly increase consumer demand, savings, and debt reduction. It draws on a Bush stunt, and might be defended against Republican attacks on just that ground, but might actually have some good effect. Here goes:

How about if the Treasury simply printed - yes, I mean printed - enough $100 bills to send every man, woman, and child who was included as an earner or dependent on last year's tax forms five or ten thousand dollars; let's say me and my wife get twenty grand, you, your old lady, and your three kids net your household $50,000, if its just you and your cats in a 1-room apartment you get ten grand. Now the best part, they just print it, no bonds, no recognition of the debt, nothing but the cost of paper and ink - just outright devalue the dollar and inflate the economy and say to hell with whatever the rest of the world thinks - just plain fuck 'em. Oh, and the IRS doesn't get to call any of it taxable income either. Just a plain and simple downright gift from Uncle Sam.

And that's it. There would be a spending spree the likes of which the country has never seen. Debts would be paid off and some would go to savings. And yes, the prices of some things would jump up to suck the money out of the economy, and yes it would be just a one-time jolt, but think what a jolt it would be. And how about the cost? Well, there is none of course other than us publicly humiliating ourselves in front of the world, but what we'd have to print would work out something like this. There are three hundred million of us, but I'd guess maybe two hundred million were carried on the tax roles, so its that times ten thousand dollars, which is either twenty billion, or two hundred billion, to maybe its two god damned trillion for all I know - at some point I can't keep track of the zeros anymore - but who really cares?

[dmallind]

1. It would be 2T, and the inflation you mention would be worse and quicker than you think

Interest rates for a start would soar as anyone lending money will know with $2T just pushed into the system it would be worth much less next year.

In nominal terms great idea. In real terms it stiffs anyone who IS lending (that we want to encourage, right?) and leaves spenders better off only for a few months. Since many would just piss it away it would leave them worse off pretty sharpish.

[Kurt_and_Hunter]

4. On what evidence, though?

"Interest rates for a start would soar as anyone lending money will know with $2T just pushed into the system it would be worth much less next year."

If so, why didn't interest rates go up the last two years then?

A lot mote than $2T has been created. Where are the interest rates? Where is the inflation?

Everyone needs to stop applying basic "common sense" economics to a situation defined by the fact that common-sense economics doesn't work.

When central bank interest rates are at 0% all the formulas are turned on their head.

Japan doubled her monetary base 1995-2002 yet was unable to create any inflation.

[NoNothing]

22. Because for all the money that has been created

It has had no velocity, meaning it hasn't circulated into the economy. It has simply sat in bank vaults, guarding against a financial Doomsday that, probably because it was guarded against, did not arrive. But that money is out there, and once it does start moving, the top priority will be to suck it back up and keep things under control.

The problem with your plan is that once you do start rapid inflation, it can be very difficult and very painful to bring it back under control. You want a little inflation; too much punishes saving and makes borrowing cripplingly expensive. It also makes our government deficit problem worse, not better, because soaring interest rates will make just the service on the debt disastrously large.

[Yo_Mama]

24. We haven't even offset the losses

I understand your point about the money injected into the economy, but the net outcome was that debt writeoffs and paydowns left the circulating money supply still lagging.

Most people won't borrow (because it costs them way too much) and so the banking system is now destroying money, even with all the injections. See H.8 data:
http://www.federalreserve.gov/releases/h8/current/default.htm

And other posters are correct that a lot of that extra money ended up in banking reserves, which are now beginning to come down.
http://www.federalreserve.gov/releases/h3/current/h3.htm
Because bank reserves are beginning to drop, money circulating and incomes should start slowly to improve in the private sector.

According to BEA, real personal incomes did grow in the last quarter ex-government transfers. Before this they grew a little, but last quarter was a real hike. Thus, there is every chance that distributing this much money on this grand a scale would start inflation in the domestic economy. And since there are many people living on very small incomes, significant inflation at this point would constitute a regressive tax on the poor who wouldn't get much in the way of that circulating extra money.

Monetary base ignores credit contractions, which tighten money in circulation. And yes, Japan did experience a deflationary cycle because of a very similar rapid credit expansion and then contraction.

As for interest rates, Treasury rates haven't gone up because of the flight to safety. That is about to end.

Credit card rates did go up and have stayed up for a lot of people. Car loans haven't dropped. The only types of rates that have dropped are the government-guaranteed ones, such as mortgages. See Gl19 Consumer Credit:
http://www.federalreserve.gov/releases/g19/current/g19.htm

As the gap between what people can get for their money in basic, safe investments (T-bills, bank deposits) and what people would have to pay for credit has grown, people have stopped a lot of spending on credit except for government-subsidized loans.

[Kurt_and_Hunter]

27. supposition ought not be offered to refute actual evidence

"Treasury rates haven't gone up because of the flight to safety. That is about to end. "

So you say.

You have no basis whatsoever for attributing treasury rates to a flight to safety except that saying so makes it easier to maintain some comfortable ideas that have been decisively refuted in the real world.

Why are mortgage rates at record lows? More flight to safety? We have record foreclosures so I'm not sure that the American mortgage applicant is a US Treasury level guaranteed loan re-payer. People know we risk bad inflation someday soon but they are writing 30-year paper at low rates for investments in an asset class coming off a collapse (and that is still declining) because they think it's safe?

No.

Bond rates are low everywhere because the class of people who are heavy into bonds believe that there will be no inflation any time soon anywhere.

You cannot simply dismiss all markets, data and facts in preference to what you think ought to happen.

[mike_c]

2. why not?-- it's how we fund wars, and if printing money is good enough for the MIC...

...it's good enough for me!

[truedelphi]

3. They already did this - except that the people who got the money were the people

In the Inner Circle of banks - the Citigroup, AIG, Goldman Sachs, JP Morgan crowd.

And they weren't sent a handful of 100 dollar bills, but a couple of 100 billion a piece.

Now there ain't squat for anyone else.

(And pls don't suggest they paid it back - they only did that by getting tax breaks enabling them to do so.)

[glitch]

21. and they're sitting on it.

But then they happen to like deflation, they can scoop up a lot of other peoples' assets for pennies.

[truedelphi]

30. So,

:hi: glitch!

Hope your summer is a happy one.

[glitch]

31. Much better than the last two, thanks for asking! How's yours?

:hi:

[truedelphi]

32. I have to agree, this summer is better than the past two.

I am no longer in constant pain. Well, except from the political situation.)

An allergy to wheat. Who'd have thunk eliminating bread and pasta (stuff I never cared for, all along my body knew) would allow me to get my life back?

Every day seems like a small miracle. I am not taking it for granted (yet)

[glitch]

33. Wow, it's really funny that you mention wheat. I've pretty much eliminated it too and feel so much

better. Also limiting rice and potatoes and other high starch foods. I eat a lot more quinoa (it has a higher purportion of amino acids/protein than rice) and get a lot more energy!

:thumbsup:

[Kurt_and_Hunter]

5. I was hammering for this in 2008

But even on DU the Calvinist resentment of somebody getting something "undeserved" was fierce.

[Gin]

7. I would have put it toward a new car...every cent would have been spent

just like my UE was....the banksters didn't need it...but I sure did.

Oh well....

[Naturyl]

29. Oh, you better believe it.

When it comes to the issue of the dreaded and feared "free lunch," DU is far, far less different from the rest of America than it ought to be.

When I advocate a guaranteed income (not linked to employment), for example, I can often hardly tell the difference between DU and Hannity.com

[Jackpine Radical]

6. OK, Now let's try that another way.

We decide we're gonna spend $1 trillion on a high-speed rail system. The money goes to pay for the materials and labor needed to put together a system that will end up substantially reducing oil consumption, roadbuilding (with heavy freight moving by rail instead of in highway-destroying 18-wheelers), etc. That way all the money we push into the economy will end up producing something of great value, so there is no inflation. The laborers are to be paid decent wages, and the resulting system will remain under public ownership.

Then we institute a national universal health care system that ends up cutting out the greed merchants and saving us money overall, while delivering good health care to everyone.

And universally accessible high-speed internet.

And finance research into every area of science and engineering. (I would especially like to see a major commitment of funding to psychological research aimed at finding a cure for authoritarianism.)

Anyway, the point is that we can continue to piss away our wealth on stopgap soup kitchen programs, or we can create meaningful jobs for everyone willing and able to work, and end up with a renewed nation.

[Kurt_and_Hunter]

9. Not in a humane time-frame

The things you describe are investments and take some time.

The things you describe are always a good idea on their merits.

As a response to a crisis, however, they are insufficient to the task.

It's like telling someone in insulin shock to eat better and get more exercise.

That said, there is no "either or". It is fine to do everything your propose but to also do things that are wasteful but possible to implement on a massive scale in a very short time-frame.

(The short-term stimulative effect of tossing bags of money at people is higher, dollar-for-dollar, than infrastructure spending. Not as good in the long run, but more powerful for the task at hand.)

[Jackpine Radical]

10. You're right, and I wouldn't propose to cut off short-term aid

(nor, for that matter, long-term aid to those who can't work) while we build and switch to a more publicly owned model.

[Grey]

13. I like the way you think, nt

[ThomWV]

16. I personally think your idea is a vast improvement on my own.

[Jackpine Radical]

18. A lot like a brainstorming session.

The end idea is a collective effort.

[MadHound]

8. Adding three trillion to the debt will weaken the dollar further,

And create an even greater headwind for us to overcome. Rather, what we need is another, greater stimulus, this time without the gobs of tax cuts, in order to create jobs.

[Kurt_and_Hunter]

11. But on what evidence?

The dollar is a good bit stronger today than it was in Summer 2008, right before the wheels fell off the global economy.

The riot of spending and debt of the last two years have not weakened the dollar.

And three trillion of job creating stimulus adds the same three trillion to the debt.

What the OP describes is the most powerful, dollar-for-dollar of government debt, form of economic stimulus. (And would create jobs.)

In the stimulus game waste is often a feature, not a bug.

[MadHound]

17. The only reason the dollar is stronger today,

Is because the rest of the world's currencies have tanked a bit. And again, how are you going to repay that debt? Print more money?

If you add three trillion dollars in job creation, you're going to get back 1.76/dollar in stimulus value, and that value keeps accruing, since it is based on employing people. Giving people money won't give you near the return on the dollar, and once the money is gone, so are the jobs. Thus, a year or two down the road we'll again experience massive layoffs and have even more debt to show for our efforts.

It all comes down to jobs, without them the best you can do is create temporary upticks, not sustained growth.

[Kurt_and_Hunter]

23. "How are you going to repay that debt? Print more money?"

Yes. Of course.

You say that like it's something comical or obviously bad.

What do you think the downside is of printing more money? We have printed more money recently than anyone ever imagined and the dollar is fine and we face ruinous deflation, not inflation at all. And interest rates are low. Mortgage rates are at record lows.

So what downside are you warning against?

As for the dollar being strong because other currencies have been hit worse... well, yeah. hat's what the value of a currency means... relative to something else. A strong currency is always strong because other currencies are weak, and visa versa.

"It all comes down to jobs." Yes, of course it does. There is, however, no reason for your belief that targeted government job creation efforts create more self-sustaining lasting jobs than would be created by sending people random checks.

Building a highway isn't a job for life. That job exists only as long as there is money to build highways. No census worker went on to start their own census... if the money runs out the job goes away.

Your belief that the three trillion being discussed is somehow consumed is incorrect. Money changes hands. It is not destroyed. The three trillion doesn't vanish when the original recipients spend it. It goes to someone else who also spends it. (Eventually a rich person gets it and doesn't spend it but that goes for everything... all stimulus faces that eventual hurdle.)

There is no source of self-sustaining employment that does not require economic recovery as a precondition.

[MadHound]

25. Umm, have you heard of hyperinflation?

Chartalism can only go so far in practice, and when you push it beyond that point you get into Weimar Republic territory, where a loaf of bread costs millions. Granted, ours is the largest modern economy in the world and it can absorb a lot, but even it has its breaking point, and frankly we're approaching that rapidly.

[Kurt_and_Hunter]

26. No.

Weimar hyper-inflation has no bearing on anything in today's America.

The only people who talk about hyperinflation are lunatics like Glen Beck, tea-bag types, charlatans trying to sell gold and ammo and mouthpieces for the super-rich.

That should tell you something about the truth and sincerity of the view. Why is this an issue promoted almost entirely by tea-baggers and the super-rich?

Because the super-rich have a vested interest in dangerously, destructively low inflation rates, and the RW has a vested interest is stigmatizing all government spending. (And the gold charlatans have an interest in selling gold.)

"Meanwhile, for those predicting hyperinflation, my question would be: what is it about the United States now that looks different to you from Japan in say, 2000? Big budget deficits and high debt? Check. Huge expansion in the monetary base? Check. And yet Japan’s GDP deflator has fallen 9 percent since 2000."

http://www.google.com/url?sa=t&source=web&cd=11&ved=0CBEQFjAAOAo&url=http%3A%2F%2Fkrugman.blogs.nytimes.com%2F2010%2F03%2F18%2Fstagflation-versus-hyperinflation%2F&ei=4J5XTMaeMMGB8gbE0ZSZDw&usg=AFQjCNHTNRZY4xsn9hz13kDlO_-x3ed8yg

[ThomWV]

14. Good, then our exports will go through the roof, farmers & manufacturers will prosper

[MadHound]

19. No, agriculture corporations would prosper,

And our manufacturing sector is far too small, we're now a service based economy. A weakened dollar, especially if it weakens to the point where it is no longer the world reserve currency (which we're already on the brink of) would be absolutely devastating. It would cost us more to contract debt, to pay that debt off, to import goods, especially oil, etc. etc. In the balance it would be a nightmare.

[Earth_First]

12. Have at it...I would throw it at the mortgage the day the check cleared. n/t

[ThomWV]

15. No check, that would imply we recognized the debt, just plain green $100 bills

hot off the press.

[tinrobot]

20. How about we take $2 trillion from Goldman Sachs, et al

...and give the money these crooks stole back to the people.

[Naturyl]

28. It's got problems, but it's a better idea than most probably think.

There would be drawbacks, but this is by no means as crazy as most people have been conditioned to believe it is.

In fact, it's actually done all the time for wars and what-not, except that thanks to the Federal Reserve, we owe interest on all of it a private bank.