Economics question: Would suspending ALL loans and rent help keep the wheels on?

[metis]

We're trying to have a complex conversation here. Stop strawmanning us.

Exactly, and this is what we expect when some people elevate their "hard-earned money" over everything else.

If the massive accumulation of debt is not handled in an intelligent and humane manner, recovery may not be possible for maybe decades since recovering from a depression may take that long if the money market doesn't free up. However, the bugger is in the details-- as always.

And, btw, one thing to watch our for is that it is possible that China may overtake the U.S. as the #1 economic power not too far down the road as they have their act together and are showing signs of improvement whereas we are sinking fast economically with an incompetent leader and an economic system not well planned and organized to handle this situation. We have to remember how long it took us to get out of the Great Depression as an example of what we may be facing.

IOW, either we work together in a well-planned and organized fashion for the common good or we're going to pay a heavy price for being self-centered and materialistic, and I do believe you'll likely agree with me on this.

 

[Revoltingest]

Exactly, and this is what we expect when some people elevate their "hard-earned money" over everything else.

You don't even bother to read the posts of those you criticize.
Instead, you only read 2nd hand misunderstandings.
This is a very aggressive kind of ignorance & prejudice.

 

[Heyo]

I've been wondering how a logical. thoughtful government would handle the upcoming economic problems that are sure to come in the next few weeks and months.

What I was wondering is if a simple suspension of all loans and rent payments might minimize the pain all around?

No, it wouldn't.
An economy is not a machine that you can simply stop and restart like an automobile, it's more like a horse, that has to eat, even if it doesn't have to work.
Our capitalistic model is built on constant grows and even stagnation will put it off the rails, let alone a complete stand-still.
A wise government would have planned for such a situation in advance (like Germany with "Kurzarbeitergeld"*).
Additionally there would have to be subsidies for businesses that suffer more than others. We're all in this together but while some industries (health care, pharma) even benefit, others have complete breakdowns (travel, entertainment). Some have high maintenance costs, while others don't. The trick is to help those who need help and don't let some profit from a crisis.

*Kurzarbeitergeld = reduced hours compensation
Don't know if that even is a concept elsewhere. Workers get subsidized payment from the state-run unemployment insurance. Businesses keep their workers on the payroll even if they don't work or work reduced hours. An instrument made for crisis like this.

 

[icehorse]

An economy is not a machine that you can simply stop and restart like an automobile, it's more like a horse, that has to eat, even if it doesn't have to work.
Our capitalistic model is built on constant grows and even stagnation will put it off the rails, let alone a complete stand-still.

I agree that this is "common knowledge". But I wonder if it's really true? It's certainly the assumption that the Feds are using to - once again - enrich bankers.

 

[Revoltingest]

Our capitalistic model is built on constant grows and even stagnation will put it off the rails, let alone a complete stand-still.

I disagree about this. Growth is something people really like for various reasons.
But if we had an economy that remained at a one level, we'd do just fine.
Never ending population & economic growth is not a sustainable model.

 

[Shad]

I agree that this is "common knowledge". But I wonder if it's really true? It's certainly the assumption that the Feds are using to - once again - enrich bankers.

A banking bailout was done to prevent a financial collapse on top of economic, biological and social systems. All 4 at once is a horrible scenario. I have heard even Sander supports point this out. If a bank goes under the customer, you and I, not the CEO lose everything as governments do not mandate banks hold assets equal to the funds put into the system. If the banks collapse the only alternative is for government to print and devalue currency to offset massive bankruptcy in the average population. That is Wiemar Republic levels of depression. As it right now a lot of the stimulus package is funded by printed money and devaluing the currency. The hope is recover offsets the value drop before rampant inflation kicks in.

 

[Heyo]

Our capitalistic model is built on constant grows and even stagnation will put it off the rails, let alone a complete stand-still.

I agree that this is "common knowledge". But I wonder if it's really true? It's certainly the assumption that the Feds are using to - once again - enrich bankers.

I disagree about this. Growth is something people really like for various reasons.
But if we had an economy that remained at a one level, we'd do just fine.
Never ending population & economic growth is not a sustainable model.

Taking a loan at interest is the assumption that you will produce more so that paying the interest is justified. That is the principle behind never ending growth. (In a nutshell - there are books written on this, long and complicated.)
Capitalization (stocks) is the assumption that you get more money (that has to come from increased production) for lending money to to a company.
Our whole economy is built on this. We would have to re-model it to get to a sustainable economy.
This is a highly complex topic, even too complex for most economy scholars. (They are less often right than meteorologists.) The differential equations are harder to solve than those of QM.

 

[Revoltingest]

Taking a loan at interest is the assumption that you will produce more so that paying the interest is justified. That is the principle behind never ending growth.

Wrongo pongo.
Borrowing & repaying with interest just necessitates making the
use of that money more productive than the cost of the interest.
This is doable in an economy which doesn't grow. It just likelly
means that not everyone will borrow.

(In a nutshell - there are books written on this, long and complicated.)
Capitalization (stocks) is the assumption that you get more money (that has to come from increased production) for lending money to to a company.
Our whole economy is built on this. We would have to re-model it to get to a sustainable economy.
This is a highly complex topic, even too complex for most economy scholars. (They are less often right than meteorologists.) The differential equations are harder to solve than those of QM.

Eventually, the planet's population must stabilize.
And so will the economy (with some fluctuation).
It cannot continue forever.
In this stabil future, I'll bet your left one that there
will still be lenders & borrowers.

 

[MNoBody]

if the oligarchs suspend economic activities, which place people in a vulnerable position of being deprived of the necessities of life and obtaining them, the onus is totally on them to suspend the arbitrary payments demanded of people for those necessities of life, like rent, any payments, food, shelter, etc.
payments for such are not just to demand as they are impossible to perform.
so whose responsibility is that?
obviously the ones imposing those conditions, they are the ones holding the obey or else weapon in everyone's faces

 

[Heyo]

Wrongo pongo.
Borrowing & repaying with interest just necessitates making the
use of that money more productive than the cost of the interest.

That is exactly what I mean with growth. Being more productive, producing more than before, selling more than before. That is economic growth. And on a limited planet, growth has natural limits.

 

[icehorse]

A banking bailout was done to prevent a financial collapse on top of economic, biological and social systems. All 4 at once is a horrible scenario. I have heard even Sander supports point this out. If a bank goes under the customer, you and I, not the CEO lose everything as governments do not mandate banks hold assets equal to the funds put into the system. If the banks collapse the only alternative is for government to print and devalue currency to offset massive bankruptcy in the average population. That is Wiemar Republic levels of depression. As it right now a lot of the stimulus package is funded by printed money and devaluing the currency. The hope is recover offsets the value drop before rampant inflation kicks in.

But I wonder if that was the only plausible solution. It strikes me that this sort of solution ultimately benefits the banks more than it does the people.

So I'm wondering whether this is the best solution to the problem (and i'm not denying the problem).

 

[icehorse]

That is exactly what I mean with growth. Being more productive, producing more than before, selling more than before. That is economic growth. And on a limited planet, growth has natural limits.

So to get a bit more precise, to me the question is this: If we assume ZPG, and we acknowledge that there are a finite amount of non-renewable resources, can we create an economic system that rewards invention and innovation?

I suspect that it would be hard to disprove that the above is impossible, and I think it's what we've GOT to work towards.

 

[Heyo]

So to get a bit more precise, to me the question is this: If we assume ZPG, and we acknowledge that there are a finite amount of non-renewable resources, can we create an economic system that rewards invention and innovation?

The question is not if we value invention and innovation, we all do. The question is what direction the inventions and innovations take. Do we want to innovate to produce more with less workers or do we want to produce the same with less resources? Both are ways to increase wealth but only the second is sustainable.

 

[Revoltingest]

That is exactly what I mean with growth. Being more productive, producing more than before, selling more than before. That is economic growth. And on a limited planet, growth has natural limits.

I don't see growth as necessary in order to pay interest on a debt.
Example....
If I borrow money to replace a roof, this doesn't increase my
productivity or grow the business. But it's worth doing if the
interest cost is less than the income lost due to a bad roof.
So if I can afford the loan payments, it's worth doing.

 

[Heyo]

I don't see growth as necessary in order to pay interest on a debt.
Example....
If I borrow money to replace a roof, this doesn't increase my
productivity or grow the business. But it's worth doing if the
interest cost is less than the income lost due to a bad roof.
So if I can afford the loan payments, it's worth doing.

I agree that that is an example of borrowing to sustain. It could be even ecologically valuable if the new roof is better insulated so that the costs of heating/cooling are reduced.
But that is not the usual goal of a capitalist. Your banker would gladly lend you even more money if you'd gentrify the building.

 

[Revoltingest]

I agree that that is an example of borrowing to sustain. It could be even ecologically valuable if the new roof is better insulated so that the costs of heating/cooling are reduced.

That's what I typically do.
I also choose roofing designs & materials that last longer.
My spendiest new roof cost $250,000, which required borrowing.

But that is not the usual goal of a capitalist. Your banker would gladly lend you even more money if you'd gentrify the building.

People have their goals of expansion.
But that is not inherent to capitalism.
It strongly relates to a burgeoning population.
That is an ecological nightmare.

 

[Shad]

But I wonder if that was the only plausible solution. It strikes me that this sort of solution ultimately benefits the banks more than it does the people.[/quote

Again part of the bailout is for the banks so people do not lose their saving when the banks go under.

So I'm wondering whether this is the best solution to the problem (and i'm not denying the problem).

It is the only solution.

 

[Shad]

if the oligarchs suspend economic activities, which place people in a vulnerable position of being deprived of the necessities of life and obtaining them, the onus is totally on them to suspend the arbitrary payments demanded of people for those necessities of life, like rent, any payments, food, shelter, etc.
payments for such are not just to demand as they are impossible to perform.
so whose responsibility is that?
obviously the ones imposing those conditions, they are the ones holding the obey or else weapon in everyone's faces

Yup. If government is ordering people not to work and businesses to close government pays the tab.

 

[icehorse]

It is the only solution.

An extraordinary claim, made with zero evidence.

 

[Shad]

An extraordinary claim, made with zero evidence.

I see no alternative bring presented ergo the only solution.