Forum Post: My idea for economic recovery
Posted 13 years ago on Nov. 8, 2011, 12:16 p.m. EST by hivemind
(131)
This content is user submitted and not an official statement
Let me say first off, that I am not an economist or a financial anything. So if this can’t work, please say so. Feel free to oppose it and make sure to state why. Also feel free to give suggestions on how it might work better. Or if you think something completely different might work better, bring it to the table.
A huge problem we have in our consumer nation is less and less consumers. With less consumers there are less jobs (no one is buying anything to employ people that sell things right?) Why can’t we buy things? Most people are saving, holding back for surprises, or simply throwing their entire pay check to their monthly expenses. Basically, there is no disposable income. Most of the money people earn is going straight to loans, credit cards, essentially the banks. And then where does it go? It gets loaned out again or held on to in order to put more American’s into debt. If that same money went into stores and manufacturers wouldn’t that money be put to better use? Wouldn’t that promote expansion?
This is my solution: Let’s not argue as to how people go into debt. That’s in the past and arguing about it would be pointless. Needless to say, we have too much debt. And there is no way to make the cost of living cheaper. The only people that really can do anything about it are the lenders. Lenders need to be forced to negotiate monthly payments to a certain percentage that is of the borrowers’ paycheck and existing debts. It should be required that a person have a certain percentage of their pay check allotted for disposable income. Thus freeing up some extra money that could be put towards things that will move the economy. Don’t get me wrong, payments NEED happen. The banks can’t forgive debts. That would hurt us all much more in the long run. They will still be getting monthly payments just based on how much a person is able to pay. It’s pretty simple in theory, but I’m not sure how one would go about to do this type of thing. I also can’t be 100% certain that this’ll work because I have yet to see something like it in action. Basically I see that the upside is that no one is being GIVEN money, the government isn’t making money to throw into the economy, and no one is losing money. Does this sound like a reasonable idea?
I think that it is a very rational argument. The big problem with it is logistics. I'm not sure if it could be instituted without stomping on people or businesses rights. It is however forward thinking and your on the right track. I feel like we need to be given the power to do it ourselves. Maybe a law that says reasonable negotiations cannot be refused. (for instance you could sue a company (for a reasonable amnt not millions) if they refused to negotiate with you over your debt. Truth is most companies will do that already it can just be more mentally excruciating than most people can handle.
If I bought a fancy sports car, is my monthly payment part of my disposable income or part of my debt in your situation? If I buy a TV on my credit card, same question. I believe your idea is unworkable, without even getting into what massive debt forgiveness will do to the economy.
I don't think that credit cards should be put into the mix. I'm talking about home, business, and student loans. Also, I am NOT talking about debt forgiveness. I do NOT think that is a reasonable solution to the problem.
I agree with this but without American manufacturing jobs here in the U.S. the problem we have now will never go away.
True. It seems like there are a LOT of factors to why things aren't working here. But if there is demand for something people start to hire. Even if we don't have as many jobs in the country at least it would open up something.
How about people stop buying too much stuff? Don't use that credit card with a 19 or 20% interest rate. People buy too much of what they don't need. The people defined as poor in the US have a lot of extra things. Look at what you buy and cut out what has been called the "latte" factor. That's those little things that you don't really need, but buy anyway, that add up.
I agree with what you are trying to accomplish with OWS. I agree with the general strategy of following the money to bring to light the changes need for America. From about 1972 to today the government continued to grow with less real revenue growth. The government provided more services to an ever growing work force and population, which is not the real problem. At the same time it increased the contractin¬g out of government services and increased the Civilian Military Defense Complex. The government budget may have been able to provide the services and Military increases but it could not pay for the continuing increases of in contractin¬g out of services to the private sector. The ever increasing government revenue stream going to the private sector for services and profit is large part of the 14.3 trillion public debt. The private sector also has a huge legislativ¬e lobby system which is very influentia¬l in increasing the flow of taxpayer money to the private sector coffers. I don't think spending cuts is really going to solve the long term problem with the deficit and the public debt. I believe a change in how the government works is needed to solve this type of problem. Maybe consider something like eliminate all for profit companies doing business with, selling products to and providing services to or for the U. S. Government¬¬. If all companies were not for profit this would reduce government spending by about 30% without substantia¬¬lly employment loses. Good companies that I would what to do business with the government will set-up a not for profit division to the government work and transfer efficienci¬¬es between the divisions.
I agree with what you are trying to accomplish with OWS. I agree with the general strategy of following the money to bring to light the changes need for America. From about 1972 to today the government continued to grow with less real revenue growth. The government provided more services to an ever growing work force and population, which is not the real problem. At the same time it increased the contractin¬g out of government services and increased the Civilian Military Defense Complex. The government budget may have been able to provide the services and Military increases but it could not pay for the continuing increases of in contractin¬g out of services to the private sector. The ever increasing government revenue stream going to the private sector for services and profit is large part of the 14.3 trillion public debt. The private sector also has a huge legislativ¬e lobby system which is very influentia¬l in increasing the flow of taxpayer money to the private sector coffers. I don't think spending cuts is really going to solve the long term problem with the deficit and the public debt. I believe a change in how the government works is needed to solve this type of problem. Maybe consider something like eliminate all for profit companies doing business with, selling products to and providing services to or for the U. S. Government¬¬. If all companies were not for profit this would reduce government spending by about 30% without substantia¬¬lly employment loses. Good companies that I would what to do business with the government will set-up a not for profit division to the government work and transfer efficienci¬¬es between the divisions.
Target Credit Card and their 22.90% interest rate charge is a perfect example of how corporations are screwing over their own vendors and customers.
If the minimum payment is 25 dollars on a Target Credit card debt of 750 dollars, ONLY 9 DOLLARS of the 25 dollars can be spent, the other 16 DOLLARS GOES TO MONTHLY INTEREST RATE CHARGES.
Target just robbed the local community by basically charging 64% interest on people who can only afford to make the minumum payment on a 750 dollar debt.
Does your solution allow the debtors to continue to spend more then they make? What you suggest is often what is done through credit counseling, but it also requires the individual to control their impulses and resist buying the next shiny toy they see.
Debtors shouldn't spend unwisely. But people aren't struggling with their debts because they are buying too much. It's usually because the loan interest is unreasonable. This is really only directed at the honest working poor that can't make ends meet because they throw all their money at their loans, which is responsible but some people can't eat because of it. No one should have to choose between good credit and staying alive.
How do you get to pay loan interest if you don't buy too much on credit? The buying part comes first, you want something pull out a credit card. If the something is big you sit with a loan officer and get to see what your payments are going to be. The fault for that debt lies with the over-consumer. Things will never improve if we keep blaming others for our own failures. There are organizations to help people get out of debt, but the hard part is taking responsibility for your situation.
Once the debt exists, and the reality exists that the difference between paying down the debt versus forever having the debt, is the interest rate that is being charged, the debtor should have the option for a lower interest rate in exchange for reducing their debts.
There is NO SUCH PROGRAM right now.
The only programs that are offered are called balance liquidation programs, which are actually a good start, but they don't allow any of the paydown money to be respent. So that debt, even though the interest rate has been lowered, becomes a black hole for the next several years and denies the debtor a chance to live on less, instead they have to live on nothing, and in many cases that cannot be done.
I assume you are talking about credit card debt, my mortgage and car loans have an ending. If it is it still starts with the individual, no one is forced to make the minimum payment and pay for decades. We all need to take responsibility for our actions. There are credit services that can help and things people can do to get out of debt, but it's not easy, they need to reign in their spending habits. Some kid with his first card may have an excuse, but it's still his or her foolish spending that started the whole mess. You can actually make money from the banks using a credit card if you pick the right card and don't carry a balance. It is possible and not hard with some discipline.
As far as being prevented from re spending and being left with nothing, the person must have indulged every whim they had to get that deeply in the hole. Just another case of when you're in a hole, in this case a financial one, stop digging, or borrowing. A liquidation program sounds like it substitutes itself for the self control the indebted individual lacks.
I find these disagreements somewhat pointless considering the fraud that has been perpetrated on the american public over the past ten years regarding home securitizations in which the government and the federal reserve simply stepped aside and let wall street screw over homeowners over the past decade.
We seem to look at this from opposite sides. It's a matter of being responsible for your own actions, of living the phrase buyer beware. No matter what the banks offered to attract customers, the loan agreements clearly outline costs and penalties. If someone got into a house he couldn't afford it's their fault, not the bank's. It wouldn't even matter how underwater the house is now. If you had taken out a loan you could afford you can make your payments and the value of the house will eventually come back.
I wrote a blog article that addresses the home foreclosure situation in a way that I don't think has been addressed before. http://swarmthebanks.blogspot.com/2011/11/why-did-pension-fund-managers-invest.html
the system fell apart because individuals got into mortgages they could not afford. Sure the banks treated bundled mortgages like a commodity but between speculators in hot markets and individuals taking out home equity loans and getting into homes they couldn't really afford, I see the fault lying with the borrowers, and the banks as enablers. They were certainly pushing the drug of easy money, but that fault also lies with the debt junkie. Some morning people woke up and looked at the housing market and realized it was a house of cards and the panic began. The individual borrowers are every bit as greedy and guilty as the banks. The exception in my mind would be the people that lost a job, then couldn't make their payments on their home.
So doctors' that prescribe the wrong type of pills specifically because they get a kickback, even though they are basically sworn to uphold a high standard of ethics, are absolved of responsibility because the patient swallowed the pills.
That's not really a valid comparison to signing up for a loan. The doctor bears a major portion of the responsibility if we are not totally informed, I've never taken a loan where I wasn't informed. I knew the payments, interest rate, and penalties for non payment.
However under the right chain of events I could say yes it could be the patient's responsibility. If the doctor sat me down and told me he was going to give me penicillin and I knew I was allergic to it, or give me B+ blood when I knew I was A-. I would bear some of the responsibility if I took those pills or got that transfusion. Also I'd bear some of the responsibility if I ever went back to him.
If you want to compare what most of us do with medication, that is just take it, with getting a loan, then a fair comparison would be this scenario. If I were to ask for a loan and just signed a blank sheet of paper, was handed money, and to trusted the details, such as payment terms and interest rate to the banker to fill in later. Under those conditions the banker would have all the responsibility.
bankers and doctors can both find themselves pressured to "move a product". Wall Street figured out they could make almost endless fake profit by simply digitally replicating existing home securitization investment programs over and over again.
The government and the federal reserve simply stepped aside and let wall street have their way with the 99%. Even bad home loans could have been renegotiated by banks that were backed by either the government or the federal reserve.
But because these crap mortgage deals were backed by wall street instead, everybody hid behind wall street (including the government and the federal reserve) with their hands held out expecting endless amounts of profits to fill their palms.
Quit defending the government and the federal reserve for their crap handling of home mortgages over the past 10 years, they are too blame first and foremost, but this does not excuse wall street for the fraud they wrought on the 99%.
You are completely right, and sadly, none of the more established economic bloggers will cede this point. The blurring of debt, as if priniciple debt and ongoing accruing interest rate debt are the same thing, drives me bonkers!
They're not the same thing. Interest rate profits are ruining the planet's economy. I wrote about this very issue recently on my swarmthebanks blog.
http://swarmthebanks.blogspot.com/2011/11/trillionaires-billionaires-higher-taxes.html
They risk models weren't designed to be based on what people can pay based on income, they were designed to be paid the same amount each month for x number of months.
Either way the banks will hurt because of this. Personally, I'd rather see the borrowers pay for being so silly as to take these loans.
I don't want to see the borrowers pay for this. The largest debt is on students. There are even debates now on whether going to school is a good investment because the price is so high and the jobs are so few. I feel that from grades K-12 kids are being fed lies about what higher education can bring to them. Most of these kids are taking out loans at 17,18, and 19 years old, I don't think it's fair to let them fail so early in life. I don't think that students should have to be punished for simply doing what society deems as "the right thing".
Plenty of us were raised to think for ourselves and not take what "society" says for anything but a grain of salt. Society says I shouldn't buy real estate right now. I say it's never been a better time to buy and have been increasing the rental portfolio. Plenty of people have disagreed with me. Some have even downright laughed at me. Why should I have to pay for their wrong headed decisions with tighter credit and higher interest rates?
Many of these kids are applying for loans that are as expensive as houses before they can even legally drink. And they are doing it because they want to be a useful member of society. If banks are retaught how to run themselves you might not have to deal with higher interest rates. I think that if we let our youth shoot themselves in the foot we are damaging everyone in society.
Also, I don't think that you should be holding people who are essentially still children to adult standards. If you don't approve of the kids that are taking out these loans if you should address it with the older generation that taught them to believe that you would become nothing without a college education.
Doesn't matter. They signed on the bottom line. I'm sure they had at least one friend who told them not to do it. I know I instructed the younger set not to get in debt for college degrees. Now I've got one friend with 100K in debt for a Classics degree (wtf does one do with that even in good times) and another with 60K of debt and a theology degree. The only way they were ever going to learn that any of this was a horrible idea was by experiencing it. Cuz they sure as heck weren't listening to me.
How would you suggest to fix things? I mean, even engineers and lawyers aren't finding work and have greater amounts of debt than the average 4 year student.
They will have to figure out a way to make it in this world IN SPITE of their education. That may mean working minimum wage jobs and sharing an apartment with 3 or 4 people. It may mean working three jobs. It may mean, god forbid, doing manual labor (we have a shortage of roofers out here right now). It may mean doing something which is a universe away from their degree. Opportunity still abounds in this country, you may have to look in some rather unconventional places to find it though.
What we need is massive inflation. When prices go up every day, people have no choice but to spend as everything is more expensive the next day. The classic way to do this is to increase the money supply, but that doesn't seem to be working. So, the Govt needs to start buying up shit and burning it, just to create some inflation. This is te Keynesian solution and it worked in the Great Depression (in the form of WWII). We don't want a war, but we need to start burning shit up. Yes, I am an economist.
Good idea
Here is another one
Place a cap on retail sales profit.
[Removed]
I hate to be the one to break the bad news, but your idea sucks bro.
I'm fine with that, but what would you do to fix things?
to start, I would fix your shitty idea
Well if you can't articulate how you would fix it then I can't really care about what you think about it.
http://www.youtube.com/watch?v=EnRCz2Dcd_A
RonPaul warns of a monetary collapse and ensuing social unrest. He also warns of possible government actions.
February 2010.
Scary :(
then put your fists up and come at me bro
lol