What does one trillion dollars look like?

"How many Republicans does it take to sit on this until it shrivels into nothing?"

I must say I don't understand your reasoning, Jim.

JE: Attempted oversimplified economics joke: In a crisis such as the present one, capital unspent and unlent is likely to go the way of the housing bubble and the Dow. Hence, the need for spending measures to put people to work, repairing seriously compromised infrastructure, get money circulating, etc. -- the very things Republicans were advocating... until after the election.

I just love how Republicans in this country are crying "socialism!", as though we didn't give the banks a trillion dollars. As though their candidate didn't vote for the bail out along with all the other fear mongers in the Senate. No, giving banks and auto makers money is no problem, but they object to people who actually need it getting 1000 dollar tax credit. We're back to grid locked nonsense in the House & Senate, Republican's being deliberately contrarian and stalling any action n order to make the President look bad.

And, being the facilitator of change that he is, Obama & Co. decided that they couldn't afford the 1000 dollar tax credit promised, and it's been dropped to 800. We have bad business practices to hand out money to, forget the good people in this country suffering because of the bad decisions made by our elected officials.

It's business as usual in Washington, I'm afraid.

I am not sure I take your point.

When the amount of currency in the economy increases rapidly, hyper-inflation occurs and the value of a dollar drops just a quickly, which exacerbates the recession or depression.

The rate at which money flows through the economy, and not the amount of money flowing through the economy, is a sign of economic health. Then again, it has been a while since I took an economics class.

Then again.... I'm a Republican!!! OMG!

JE: That's what I mean: Don't sit on it (banks, Congress) -- get it flowing! Two quote from Republican-conservative columnist David Brooks in today's NYT:

The Democratic response to the economic crisis has its problems, but let's face it, the current Republican response is totally misguided. The House minority leader, John Boehner, has called for a federal spending freeze for the rest of the year. In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely appropriate.

That's from a Republican.

the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely appropriate.

Maybe I misunderstand (highly likely re: economics), but is that "appropriate" at the end meant to be "inappropriate"?

The facts/statistics tell me to (absoutely) trust no politician at any given time or circumstance; they're paid liars and they love their work. So, the trillion-dollar figure? Don't trust it. Of course, I've wound up losing a lot of my faith/hope in the last two years, so I've nurtured a prety consistent hatred for my fellow man, and politicians are no exception. No person will ever do anything selflessly. Every person will accomplish a goal for their own specific gain. This goes for democrats as well as liberals. Why do we feel the need to elevate our leaders to godlike status?

JE: I don't feel that need. But you must admit, a trillion is lots.

By Anthony on March 10, 2009 11:06 AM
I am not sure I take your point.

When the amount of currency in the economy increases rapidly, hyper-inflation occurs and the value of a dollar drops just a quickly, which exacerbates the recession or depression.

Yes, you're right, but here's the way I see it: the downturn that has happened in the stock market, as well as the failures of various companies, have removed capital from the economy, i.e. reduced the money supply. Consider that stock is an asset, which can be used as collateral in a loan. If you own stock in company ABC, and its stock price falls from $100 to $1, then you've lost 99% of your capital. If the company goes under, you lose 100%. Either way, capital disappears from the economy as a whole. This results in less money being available to the whole economy. Given the sudden sharp decrease in the supply of money, its perceived value increases (especially since prices don't fall to reflect the decreased money supply) and people tend to start hoarding.

So having the government inject a trillion or so into the economy at this point in time is merely the government's way (and pretty much the only way it has to do this) of injecting actual capital back into the economy. Also, central banks will lower interest rates to encourage borrowing and encourage people to start spending money they don't have.

In reality, the government hasn't injected actual "new" capital into the economy. They've merely borrowed from future earnings (i.e., taxes) to pay for stuff now.

I don't pretend that my musings are in accord with any particular economic theory - it might be that they are, and I admit I don't know enough economics to say. This is just my take on it. And, imho, the Great Depression happened precisely because of a perfect storm of stock market crash and widespread bank failures removing a significantly large percentage of the economy's capital. When people were used to seeing $100 pass through there hands in a given week, and suddenly that dropped to (for example) $10, they're naturally going to hold on to whatever they do get their hands on.

It would be interesting to compare the Great Depression's early stages with what is happening now in these terms, to see what percentage of capital was destroyed in the Great Depression and what percentage has been destroyed in the last 8 months. That, to me, would be a real indication of whether this is not as bad as, as bad as, or worse, than the Great Depression.

The rate at which money flows through the economy, and not the amount of money flowing through the economy, is a sign of economic health. Then again, it has been a while since I took an economics class.

I believe this is called "the velocity of money" concept; and if wikipedia is to be trusted, velocity of money can be calculated as (value of all transactions) divided by (value of all money available) in a given period of time. Again, I don't know enough economics to be sure, but I get the feeling that if the velocity of money remains constant, then we'll do okay. Because the amount of capital in the system has decreased, a lower level of economic activity can be expected - but if the velocity of money is reduced (i.e., people and corporations reduce spending even more than the reduction of the money supply), then we're more likely to see serious trouble.

Hence the government's wish to get money out there and moving.

But hey, what do I know?

Does anyone EVER consider the lie that government spending can end a recession? Where does the government's money come from. 1. Print it, leading to hyper inflation. 2. Take it from us via taxes. 3. Borrow it and then take it from us to pay it off.

How many Democrats does it take to steal all that money? How long until Obama earmarks it to hell and back? Oh, but just this once. I'm sure.

Bush, liar, thief, and war criminal, spent more than Clinton. Economy tanks. Hence, the government should... spend more than Bush? Great logic.

Don't trust politicians with a dime. Just because politicians aren't spending your money doesn't mean all spending will stop. That's terribly misguided logic. But it's okay to rob our children. Pump up that deficit. Pump up that debt.

The Banks currently have the ability to loan out an 2 trillion dollars without additional government money. The problem, dear sir, is that they don't think anyone will be able to pay them back, not that they need more money. (Although technically they do as ALL our banks are insolvent if we make them truly balance their sheets, but no one is talking about that just that they froze the credit market)

As to government spending, couldn't agree more, the government is the only actor who can spend us out of a depression. The republicans are just hesitant to waste it all on dem pet projects without proven economic stimulus benefit. For which i applaud them.

No one knows the answer, so lets not randomly throw mud about. What i would love you for you to do, would be to apply your "Opening Shot" skills to political speeches and commercials.

"In other words, after a decade of profligacy, the Republicans have decided to demand a rigid fiscal straitjacket at the one moment in the past 70 years when it is completely appropriate."

Maybe I misunderstand (highly likely re: economics), but is that "appropriate" at the end meant to be "inappropriate"?

Agreed, poor writing. Perhaps he meant the profligacy was completely appropriate this one moment in 70 years.

I just found the article at the NY Times website and it does say "inappropriate": http://www.nytimes.com/2009/03/10/opinion/10brooks.html?_r=2.
That makes more sense. Believe me, I'm confused enough by economics as it is!

Jim. As you're a movie critic, not an economist, I will forgive this post. But you have to understand that what you are writing is very, very wrong.

We are not sitting on a trillion dollars. That trillion dolars does not exist. Our government runs at a deficit. In order for our government to spend a trillion dollars, we have to sell bonds to a foreign power (China, mostly) and accrue debt that is to be paid later.

China and other countries will lend us the money because they want us to buy their DVD players, toasters, cars, etc.. Their economy is run by exporting goods produced by a low paid workforce that they are able to keep employed by lending us money.

We, on the other hand, are not helped by borrowing it except in the most artifical way. By releasing trillions of dollars into the system, the stock market sees an artificial boost which they hope will last the president's first term. And that's the only possible good to come from it.

In the not to distant future, the interest on the national debt will exceed the amount of money we bring in by taxation. For a sobering example, if we were to tax everyone who makes over $250,000 at 100% in 2009, that would only generate $1.2 trillion, or 1/10 of the total debt. Our only options to pay the interest soon will either to monetize the debt by printing enough money to cover it (which will cause hyperinflation) or to renege on it (which will cause hyperinflation).

And before anyone starts making tired excuses about how the war in Iraq or Bush's tax cuts are the problem, the total of those two things are $1.5 trillion dollars over the past seven years. Or the deficit of this ONE year. We are being drug under by wasteful social spending - it isn't nice to say but it's true to say.

Unless we do something to curb spending soon, the dollar won't be worth the paper it's printed on. And as our population ages and demands more social services like Social Security, Medicare, Medicaid, etc. (we'll have one worker for every non-worker soon), this problem looks to get worse, not better.

Heading down to your nearest UBS and getting some Swiss francs isn't a terrible idea. Neither is getting a few ounces of gold before it explodes in the next couple years.

Rome is burning here. Setting more fires won't stop it.

The hyperinflation brought about by not paying debt mentionedin the post above would occur if investors, recognizing that debts are not being honoured, were to take their investments elsewhere.

The question is - where? The Euro? THe short of it is there is no safe haven for investment. In fact, the US has long recognized its unique position in the world as a safe haven for capital. Capital has been flowinginto the US for decades, not just in bonds but also feeding private lenders.

DOes the post above imagine that there is a divide between government and private lenders? The point is - it is a bit more complicated than reciting the `laws` of hyperinflation, a phenomenon I might add that can be, and has been, quickly cured (within months max).

Interesting comic strip regarding the relationship between the bail outs and the bonuses:
http://xkcd.com/558/