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Good news for the economy

ricksfolly

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According to the Thomas Reports Inc., The Senate voted 61-38 for the Treasury to loan $300 billion in private credit to community banks for small business loans, and to provide 12 billion in small business tax breaks.

ricksfolly
 

phattonez

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Corporatism, hooray! Let's ignore the actual problem about why banks aren't lending money and just give them money to lend! That will fix it!
 

Grim17

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When will the government spending money we don't have ever stop?
 

Kushinator

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Corporatism, hooray! Let's ignore the actual problem about why banks aren't lending money and just give them money to lend! That will fix it!
Banks are not lending because they (or so it would seem) do not have ample faith in US firm's ability to repay their loans on time.
 

Grim17

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Go back and read it. The government isn't spending a dime. It's a loan from the Treasury.

ricksfolly
The Treasury is the government. At least it was last time I checked.
 

dontworrybehappy

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The Treasury is the government. At least it was last time I checked.
Yea that wasn't the most intelligent thing RF has ever said. In fact this helps me understand why liberals are the way they are. Where do you think the treasury gets it's money, RF? Lol

Hint: if it starts with US department of... It's taxpayer funded.
 
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phattonez

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Banks are not lending because they (or so it would seem) do not have ample faith in US firm's ability to repay their loans on time.
And would giving them more money fix that problem? As an interesting tangent, are banks lending to companies that are profiting?
 

phattonez

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Go back and read it. The government isn't spending a dime. It's a loan from the Treasury.

ricksfolly
Loans have a cost. You can't just lend infinitely. Eventually you're going to see a rise in the real interest rate (aka crowding out) so that private institutions won't lend.
 

ricksfolly

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Yea that wasn't the most intelligent thing RF has ever said. In fact this helps me understand why liberals are the way they are. Where do you think the treasury gets it's money, RF? Lol

Hint: if it starts with US department of... It's taxpayer funded.
Okay, okay. I'll admit I was wrong, but in my case it is a rarity.

Now if all the others would do the same when they are wrong, we might turn this forum into productive, not gotcha, debates.

ricksfolly
 

Grim17

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Okay, okay. I'll admit I was wrong, but in my case it is a rarity.

Now if all the others would do the same when they are wrong, we might turn this forum into productive, not gotcha, debates.

ricksfolly
I hate standing by a mistake. I have no problem at all admitting when I'm wrong.
 

Kushinator

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And would giving them more money fix that problem? As an interesting tangent, are banks lending to companies that are profiting?
I believe OldReliable mentioned this before; there really is not much demand from firms as they have made a rather large rush into cash following the credit crunch (hence my previous reference to a liquidity trap). From what i can gather, and this is really just from my area of the country, businesses can get loans as long as long as they can show positive cash flow. However, what they are willing to pay vs what banks are willing to charge is creating a bit of turbulence. Some firms will only take on additional credit if they can get something like prime when lenders want to charge them prime + libor.

In the wake of slower than anticipated GDP growth, it will be interesting to see how low the Fed can pull long term rates. The name of the game is getting interest rates low enough to spark a flow into equities without devaluing the assets on the Feds balance sheet (ammunition necessary to curb future inflation).
 

phattonez

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Hypothetical question, ignore the other effects associated with such an action, but would an increase in the savings rate and a decrease in the debt that the US holds result in a lower amount that banks would charge to lend money?
 
E

Economist17

when banks have more money to spend, they usually will spend more money. If they aren't, something is seriously wrong. The motive behind this is simple, people usually repay their loans, otherwise banks wouldn't exist. So if they have more money they will be willing to spend more. So this is probably going to help a bit, what really needs to be addressed is the lack of faith consumers banks and other firms have in each other.
 

Barbbtx

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What real conservatives? With tea baggers running the show, I thought Cs were a dying breed.

ricksfolly
Nice gutter mouth

The tea party backed candidates are conservatives. Where have you been? Conservatives are far from being a dying breed. The dying breeds I see are RINO's, and liberal or moderate Republicans.
 

Kushinator

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Hypothetical question, ignore the other effects associated with such an action, but would an increase in the savings rate and a decrease in the debt that the US holds result in a lower amount that banks would charge to lend money?
No. As is the case in China, when savings increases as a function of expected income increases, inflation will persist which drives up the cost of credit (demand determinant). In the case where increased savings is a function of lower expected income (as it is now), the cost of credit will be similar. Reason be, the only reason rates are so low is because the Fed has put excess reserves at an unprecedented level.
 

phattonez

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Maybe I'm not reading your post right. Are you saying that in the China example that inflation is persisting because savings is increasing?
 

Kushinator

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Maybe I'm not reading your post right. Are you saying that in the China example that inflation is persisting because savings is increasing?
Not because of increased savings, but because of increased demand for credit (which is a function of income growth). Strictly speaking, demand is outpacing supply.

If supply outpaces demand, then yes rates will fall. The issue arises when both demand and supply fall (demand for credit and supply of loans) which is where central banks become important.

However, a caveat arises as supply for credit is determined by cash flow (or income).
 

dontworrybehappy

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Okay, okay. I'll admit I was wrong, but in my case it is a rarity.

Now if all the others would do the same when they are wrong, we might turn this forum into productive, not gotcha, debates.

ricksfolly
The problem Rick, is that there are people on this forum who, no matter how many ways you prove they are wrong, WILL NEVER ADMIT they are wrong.

It just makes them look like idiots. The non-admitters tend to be liberals on this forum, although they aren't strictly along party lines.

Everyone is entitled to their opinion and I would NEVER think to make someone say "admit you're wrong" to something opinionated, like if you think Obama is doing a good job. But saying that the treasury is funding it, not the taxpayers, yea, that's pretty much false.

And you manned up and admitted it. That's good.

Now, back to the topic, how will throwing more of the taxpayers money at this problem solve it?
 
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Councilman

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Welcome to the Obama world of phony B.S. (boondoggle spending) in the history of the world.

How much money is Obama gfoing to waste before the Congress wakes up to the fact that so far not one damn thing they have wasted money on has been cost effective.

This is stupid beyond belief.
 

Kushinator

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Welcome to the Obama world of phony B.S. (boondoggle spending) in the history of the world.

How much money is Obama gfoing to waste before the Congress wakes up to the fact that so far not one damn thing they have wasted money on has been cost effective.

This is stupid beyond belief.
Please define cost effectiveness within the context of government spending.
 

obvious Child

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According to the Thomas Reports Inc., The Senate voted 61-38 for the Treasury to loan $300 billion in private credit to community banks for small business loans, and to provide 12 billion in small business tax breaks.

ricksfolly
It's interesting to see how it look this long for the government to finally pull out a tool that works aganist financial/liquidity recessions. We saw Bush and Obama waste months with supply side and Kenysian ideas. Neither have worked in history. However, effective direct government lending can result in really bad outcomes that could make this recession look cute.
 
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