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

[Heyo]

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).

Bailouts often are without viable alternatives. Bailouts in the form of just giving money to the corporations and not doing anything else has a lot of alternatives.
1. Take over
In this case the government bails out the corporation by buying its stock. Possibly the smartest option but it smells too much like socialism that it could be ever employed by the US.
2. Bail out and regulate
Sometimes a business or whole industry gets into trouble by an external event, like now with covid19. But often the trouble is self inflicted and systemic, like in 2008 with the mortgage crisis. In the later case the bailout should be connected to regulations that prevent repeatitions.
3. Bail out and phase out
Some industries are just not viable. They would need constant subsidies or regular bailouts. In that case, to prevent massive unemployment at once, it could be sensible to let it die slowly with planned decreasing subsidies.

 

[icehorse]

@Heyo and @Shad

I think that our government and the economists we tend to hear from share a broad mindset that isn't actually the only way to look at these things. Everything you're saying seems to implicitly buy in to this mindset. I'll call it something like "business first". The idea that the economy is driven by business. What if that basic premise is wrong? What if the economy is in fact driven by consumers, or at least if the economy is driven by businesses and consumers equally?

Here's a guy who's far more eloquent than I am:

now think about the couple of trillion "business bailout" dollars that congress is planning to spend...

 

[Heyo]

@Heyo and @Shad

I think that our government and the economists we tend to hear from share a broad mindset that isn't actually the only way to look at these things. Everything you're saying seems to implicitly buy in to this mindset. I'll call it something like "business first". The idea that the economy is driven by business. What if that basic premise is wrong? What if the economy is in fact driven by consumers, or at least if the economy is driven by businesses and consumers equally?

Here's a guy who's far more eloquent than I am:

now think about the couple of trillion "business bailout" dollars that congress is planning to spend...

I'm totally with Mr. Hanauer here. The goal of the stimulus should be to keep people employed. That means, the businesses must be able to keep the workers on the payroll even if their business goes down temporarily. Ideally, the money poured out by the government should freeze the status quo until "business as usual" is possible again. The problem is that the big corporations are going to take the money for stock buy-backs, executive bonuses and dividends if the politicians let them.

 

[MNoBody]

there is one thing about the whole scenario that is troubling is that contracts with any of those offering such benefits...well, they come with more in the contract than people may think.....look how Bruce Willis stunt with Apple turned out...he read the fine print and decided to sue publicly...big spectacle.....what ...ehem...."rights" might one forgo by signing on that dotted line?
it is a proverbial contract with the "devil"...so to speak, given all the things one may have heard regarding such legal sophistry.

 

[Revoltingest]

Everything you're saying seems to implicitly buy in to this mindset. I'll call it something like "business first". The idea that the economy is driven by business. What if that basic premise is wrong? What if the economy is in fact driven by consumers, or at least if the economy is driven by businesses and consumers equally?

I don't like the "business last" approach either.
No matter what some guy says in a TED Talk, if a business
dies, so do all the jobs. And it should concern us that the
investors/owners of the business lose their livelihood too.

There's no need to decide which to kill off. Just go with
government assistance to all suffering from the shut down.

 

[icehorse]

I don't like the "business last" approach either.
No matter what some guy says in a TED Talk, if a business
dies, so do all the jobs. And it should concern us that the
investors/owners of the business lose their livelihood too.

There's no need to decide which to kill off. Just go with
government assistance to all suffering from the shut down.

Mostly agreed, but I'd say let's worry less about the cruise ship industry - let's focus on where we can help the most people and businesses.

 

[Revoltingest]

Mostly agreed, but I'd say let's worry less about the cruise ship industry - let's focus on where we can help the most people and businesses.

Cruise ships are entertainment, vacation & luxury things, sure.
But such industries employ vast numbers of people. And profits
accrue to retirees, 401Ks, IRAs. When you're retired, you'll
see that passive income is essential.

 

[Shad]

@Heyo and @Shad

I think that our government and the economists we tend to hear from share a broad mindset that isn't actually the only way to look at these things. Everything you're saying seems to implicitly buy in to this mindset. I'll call it something like "business first".

I said both the citizen (and legal non-citizens to cover my bases) and business need relief due to the shut down.

The idea that the economy is driven by business. What if that basic premise is wrong? What if the economy is in fact driven by consumers, or at least if the economy is driven by businesses and consumers equally?

I never claimed such.

now think about the couple of trillion "business bailout" dollars that congress is planning to spend...

We can argue about if the citizen or business get the lions share of the aid but your video does nothing to address my points. You are only focusing on 1 part of my point while ignoring the citizen side.

 

[icehorse]

We can argue about if the citizen or business get the lions share of the aid but your video does nothing to address my points. You are only focusing on 1 part of my point while ignoring the citizen side.

And earlier, Shad:

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.

This is the post I was referring to, sorry for any confusion.

This is the point where I think we've been sold a false dilemma. That there are other options on the table. It's not as simple as "bail them out or we all lose our money".

 

[gnomon]

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?

I don't know.

The one thing I'm wondering about, and it may have already been addressed, is why should companies forced to close down continue to pay on their lease for the amount of time that they are closed down? Again.....this question is coming from complete ignorance. But it seems to me that if the government declares a business non-essential and they must close down providing no more employment....that it is on the onus of the government to forgive lease payments for those businesses.

Such as Simon Property Group. The largest mall organization in the U.S. closed down all their facilities shuttering numerous businesses from their locations. I've been lazy on looking it up but does Macy, Sears, Sephora, that cookie company I can't remember......do they have to pay on their leases since Simon Property Group voluntary forced a shut down of those companies on their property?

I would think the Fed providing recompense for the property owners of not only national chains but small businesses leasing out lots from these property owners would be better than providing direct cash to banks to keep providing loans to those businesses.

But again.....I don't know anything along these lines. But considering that if entire corner strip is shut down as non-essential the property owners could ask to shut down all utilities for those facilities. The government could cover a portion of their loans during the downtime to defer their payments allowing those companies shut down to divert whatever cash on hand, if any, along with the supplemental provided payments to individuals and families, provided buy the stimulus, until such time that this pandemic subsides and those businesses can reopen along with their original staff. The property owners could survive, the businesses they lease to could survive and the employees could survive as well.

Again....my god I'm exposing my idiocy on these issues....but isn't this essentially bailing out the airlines concept. I don't know?

Remember.....I don't know anything about any of this. It's just a question.

I would like to hear from those who own businesses that were forced to be shuttered and those who understand economics.

And if I'm an idiot on these lines.....please let me know.

 

[MNoBody]

gives them a good reason to raise the debt ceiling again...and debt is money

 

[Shad]

And earlier, Shad:

This is the post I was referring to, sorry for any confusion.

Thanks

This is the point where I think we've been sold a false dilemma. That there are other options on the table. It's not as simple as "bail them out or we all lose our money".

What options are those?

 

[Heyo]

What options are those?

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

 

[Shad]

I don't know.

The one thing I'm wondering about, and it may have already been addressed, is why should companies forced to close down continue to pay on their lease for the amount of time that they are closed down? Again.....this question is coming from complete ignorance. But it seems to me that if the government declares a business non-essential and they must close down providing no more employment....that it is on the onus of the government to forgive lease payments for those businesses.

Such as Simon Property Group. The largest mall organization in the U.S. closed down all their facilities shuttering numerous businesses from their locations. I've been lazy on looking it up but does Macy, Sears, Sephora, that cookie company I can't remember......do they have to pay on their leases since Simon Property Group voluntary forced a shut down of those companies on their property?

I would think the Fed providing recompense for the property owners of not only national chains but small businesses leasing out lots from these property owners would be better than providing direct cash to banks to keep providing loans to those businesses.

But again.....I don't know anything along these lines. But considering that if entire corner strip is shut down as non-essential the property owners could ask to shut down all utilities for those facilities. The government could cover a portion of their loans during the downtime to defer their payments allowing those companies shut down to divert whatever cash on hand, if any, along with the supplemental provided payments to individuals and families, provided buy the stimulus, until such time that this pandemic subsides and those businesses can reopen along with their original staff. The property owners could survive, the businesses they lease to could survive and the employees could survive as well.

Again....my god I'm exposing my idiocy on these issues....but isn't this essentially bailing out the airlines concept. I don't know?

Remember.....I don't know anything about any of this. It's just a question.

I would like to hear from those who own businesses that were forced to be shuttered and those who understand economics.

And if I'm an idiot on these lines.....please let me know.

The government can not stop private loans nor rent payments that are legal while not being a party to those contracts. Government can delay the process of eviction as eviction is a legal process. First a legal notification of non-payment followed by a legal filing of eviction and finalized by a removal order of the trespasser by government if the former tenant refuses to leave . In many nations government law enforcement is required to remove a trespasser from property while making it illegal for the owner to physically remove the trespasser. Government can delay the filing of eviction or delay removal of the trespasser. Simply put the tenant becomes a squatter by legal definitions. The tenant has more power to stop action by landlords at this time which forces the government to take action on their behalf or court orders as per the above.

Simons (SPG) closed down by their own accord in many locations not by Fed government mandate. Some locations were closed due to city and state mandates. For voluntary closures the issue become centered around if a company needs a loan, government action/inaction and which action was directly responsible for a loss in revenue. For example freedom of movement is restricted but closure is not mandated. Government makes it impossible for the citizens to be customers thus harming the business indirectly. This needs to be separated from ordered closures.

Some of forms of aid are specific to payroll at 0% interest with a decent grace period. Being government aid said government can vote to defer payments by amending the existing law if leadership believes it is warranted.

Toss in there is the jerk factor and PR. Various companies/landlords could have defer payment clause within their contracts. Depending on contract bias the tenant, landlord or both may have deferment actions. The parties can amend the contract to include or increase deferments of payment. Any company that needs good public relations will provide deferment and tell everyone about it. Some of the government aid is to offset costs if a company is required to operate such as electricity, water, etc while deferring payment from the customer. Companies/landlords which try to railroad will be found out sooner or later.

 

[Shad]

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

No one is going to nationalize business in the USA on any major level thus is not a viable idea. Saying nationalize it is not an argument.

The bail out and regulate policy is already completed in a number of bills already however flawed it is.

A lot of business rely on subsides. Which business die or continue and based on what?

 

[Heyo]

No one is going to nationalize business in the USA on any major level thus is not a viable idea. Saying nationalize it is not an argument.

That is an unfortunate reality of the US. But it is a rational alternative, just not a politically practical one.

The bail out and regulate policy is already completed in a number of bills already however flawed it is.

And in todays climate it is more flawed then ever. I fear that the current stimulus packet of about $ four trillion is going strait into the pockets of the super rich and ruin the economy of the US for decades. And when there is no middle class left to fleece and the dollar tanks, my government and other NATO countries are going to bail out the US.

A lot of business rely on subsides. Which business die or continue and based on what?

Ideally system relevant industries (agriculture, energy, infrastructure) are subsidised indefinitely.
Practically it will be those who have the best lobbyists and the least shame.

 

[MNoBody]

possibly, many more people will end up from this losing their equitable title access to the property they thought they "owned" but in fact, never did.
typically crisis like this has been used to facilitate the transfer of titles away from the class that has the least wealth and aggregates into the hands of a small number.... likely this will repeat

 

[Shad]

That is an unfortunate reality of the US. But it is a rational alternative, just not a politically practical one.

Nope. Saying nationalize it is not an argument nor does it infer it is an rational alternative. Make an argument otherwise you are merely asserting in the shallowest of ways.

And in todays climate it is more flawed then ever. I fear that the current stimulus packet of about $ four trillion is going strait into the pockets of the super rich and ruin the economy of the US for decades. And when there is no middle class left to fleece and the dollar tanks, my government and other NATO countries are going to bail out the US.

Speculation

Ideally system relevant industries (agriculture, energy, infrastructure) are subsidised indefinitely.

And which business are cut off and die?

Practically it will be those who have the best lobbyists and the least shame.

So you have no standard.

 

[icehorse]

The government can not stop private loans nor rent payments that are legal while not being a party to those contracts.

We're in unprecedented territory here. What I'm wondering about is not STOPPING payments, merely SUSPENDING them - across the board.

 

[MNoBody]

We're in unprecedented territory here. What I'm wondering about is not STOPPING payments, merely SUSPENDING them - across the board.

that would make a lot of sense and show the people that they are actually benevolent and can display a modicum of competence and the people do not need to roll out the guillotines