Posted on 03/21/2020 8:21:36 AM PDT by 4Liberty
Standard Macro policy, taught to every student, says that the government should accumulate “budget surpluses” during good times (like the past few years). That the positive balance should then be accessed and spent, when the “business cycle” kicks in and our economy dips for whatever reason. …..In short, the Federal government should not have to borrow to fund all the emergency-assistance being discussed in the news (or have the Federal Reserve furiously printing more fiat dollars to bail out asset prices). These policies only take us further down the road to a larger debt - and inflation. This “bill” will come due eventually – it cannot printed or borrowed away, and it eventually is borne by all Americans.
The Federal government then has a surplus ready to cover a budget shortfall as unemployment rises, tax receipts fall, and there is more demand for unemployment benefits.
This is called “macro stabilization policy.”
Whether we citizens should instead be banking that “surplus” in OWN savings accounts for a “rainy day” instead of having the Feds “save money for us” - is an important issue but I will set that aside (Answer is yes, HECK Yes).
In short, the Federal government should not have to borrow to fund all the emergency-assistance being discussed in the news (or have the Federal Reserve furiously printing more fiat dollars to bail out asset prices). These policies only take us further down the road to a larger debt - and inflation. This “bill” will come due eventually – it cannot printed or borrowed away, and it eventually is borne by all Americans especially younger ones.
Financial planners advise households to maintain “3 to 6 months” saved in a liquid account, to cover living expenses in case of an unexpected emergency such as car accident or medical issue. Also, Unicorns are real and my neighbor has a barn full.
But - last point – this ‘lack of savings’ in the typical American household is entirely the Federal Reserve’s fault.
The Fed should NEVER be in the business manipulating interest rates in order to keep them artificially low. Only banks benefit from this practice: they borrow at the “discount window” and turn around and loan it back to us at higher rate, enjoying that spread as “profit”). The rest of us suffer and are placed greater at risk, in the long run: Printed money to “ease credit” encourages unsustainable levels of borrowing, discourages saving, and incentivizes young people to use credit cards. (If Visa Card interest rates were higher, to reflect their actual “risk” as young borrowers, they would avoid amassing debt and begin to save for things they will need). If interest rates were allowed to shift and change to reflect risk and reward savers, we would not be collectively crying and screaming to the government today – for “bailouts.”
The author of the NYT’s piece last week who proclaimed “The Era of Small Government is Over” sure missed the boat the big dummy – he needs to take a few days off and read some Mises and Hayek (for starters).
The Trillion-dollar emergency bailout seems outrageous. Yes, millions of working folks are hurting badly, but billions in pork (corporate welfare) were tossed into these bills. The average worker has not even a dollar in savings, “thanks” to the distortive Fed ‘monetary policies.’
While this crisis seems overblown - one good thing that may come from it is: we will have accumulated more information in order to plan - for when a serious disease outbreak hits.
Budget surpluses cannot be meaningfully saved, not in companies and not in governments. Its always true. Pension funds are the closest thing. And they are often underfunded as they are used during hard times. And not restored during good times. There is always some citizenry who wants the money spent.
Spending less and retiring debt in good times is the theoretical goal. There is absolutely no mechanism for the US government to have a savings account.
Thanks for proving my point.
The article states the same as my post. What it does not do is create an imaginary savings account for our government.
Even the SS “lockbox” is filled with IOU’s.
Fight of the Century: Keynes vs. Hayek - Economics Rap Battle Round Two
https://www.youtube.com/watch?v=GTQnarzmTOc
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.