Stimulus, shmimulus: Those rebate checks won't help
The $168 billion needed for the rebates can come from just three sources: taxing, borrowing, or printing money. Raising taxes is simply not an option, politically, in the run-up to an election. The rebates thus will be funded through a combination of new deficit spending and currency creation. The former implies higher future taxes, to pay interest to bondholders and to retire the debt upon maturity; the latter intensifies the inflationary pressures already evident in the economy. Both will impose heavier burdens on the private sector and will augur slower economic growth.
The currency is being diluted.
Financial Bettors May Be Making a Capital Blunder: David Pauly
In recent months, these financial companies have sold $262 billion in new securities -- much of it common and preferred stock -- according to Bloomberg data. This gives them capital they need to offset losses from subprime mortgages that now total $343 billion.
Investors obviously don't see this as throwing good money after bad: They eagerly buy more shares than the companies initially planned to sell.
The shares are being diluted.
After thinking this through, I wish to offer another thought.
ReplyDeleteThe $168 billion needed for the rebates can come from just three sources: taxing, borrowing, or printing money. Raising taxes is simply not an option, politically, in the run-up to an election...
I have a solution. Impose a 100% sales tax on the stimulus check and it could pay for itself through taxes. Well, mostly pay for itself. There would be some administrative costs clearly.
I love sarcasm. ;)
Stag,
ReplyDeletePerhaps we need another stamp tax. Think bigger/heavier stamps. Everytime you place a stamp on a letter, additional postage is due. If we also get rid of email & e-file the budget crisis will be solved.
I'm also mulling over a cap and pretend policy which is gonna be HUGE.
MAB,
ReplyDeleteGreat idea!
I'm reminded of Xeno's paradoxes.
http://www.answers.com/topic/zeno-s-paradoxes?cat=technology
Achilles runs a race with a tortoise, who has a start of n metres. Suppose the tortoise runs one-tenth as fast as Achilles. Then by the time Achilles has reached the tortoise's starting-point, the tortoise is n/10 metres ahead. By the time Achilles has reached that point, the tortoise is n/100 metres ahead, and so on ad infinitum. So Achilles cannot catch the tortoise.
As a starting point, just assume the stamp weighs one-tenth as much as the package. As you suggest, more and more stamps are placed to pay for the previous stamps! There's no leaving the post office. Ever! I think I've been there on such days during the Christmas season.
That's a great government solution if ever I saw one. Of course, with digital technology one should be able to speed the process up considerably and get to infinity far faster than one might expect (historically).