How does the Govt plan on dealing with a 2 trillion dollar additional debt?

[gabagoo]

Hoping everyone is well and staying somewhat isolated....

As much as the payouts are needed to get us all through this horrible time, what happens a year or two from now...Nobody wants tax increases. How does the Govt deal with debt like that? Is there even a plan in place? Everything I learned in economic classes says that there is a price to pay...just what will it be?

 

[Pat Whatley]

The same way they've dealt with the other $25 TRILLION dollars in debt....just pass it on down the road. Keep in mind that the individual bailout checks aren't a government grant, they are just giving you an early tax refund. A whole lot of people are gonna be pissed when they do their taxes in 2021.

 

[Texas_Signmaker]

The same way they've dealt with the other $25 TRILLION dollars in debt....just pass it on down the road. Keep in mind that the individual bailout checks aren't a government grant, they are just giving you an early tax refund. A whole lot of people are gonna be pissed when they do their taxes in 2021.

Well, at the rate we're going it looks like I'll be in a lower tax bracket this year.

 

[Bobby H]

Here's another thing that could happen (it may even be likely): the government will start printing money like crazy and use inflation as a means of driving down the value of that debt. Obviously there are many consequences from such an action. But it wouldn't surprise me if the government ended up using the tactic anyway.

 

[chester215]

They will start printing these.

 

[Gino]

Not sure how they'll deal with it, but let's take one crisis at a time, huh ??

Perhaps, your country could give us the money for taking this appraoch ??

 

[James Burke]

Back in the day, when our country was in need, they issued war bonds and WE invested back into OURSELVES, and we paid as we went.

Now, this country looks like a bunch of piglets lined up for next available teat.

JB

 

[WildWestDesigns]

Back in the day, when our country was in need, they issued war bonds and WE invested back into OURSELVES, and we paid as we went.

Now, this country looks like a bunch of piglets lined up for next available teat.

JB

Back then, we actually had something tangible to invest in (as in production), now we really don't. Maybe this will force some to come back, but it really all depends on how things are handled.

 

[Texas_Signmaker]

Here's another thing that could happen (it may even be likely): the government will start printing money like crazy and use inflation as a means of driving down the value of that debt. Obviously there are many consequences from such an action. But it wouldn't surprise me if the government ended up using the tactic anyway.

They are printing money, it's called quantitative easing. In 30 years that 2 trillion would be more like 20 billion

 

[gabagoo]

Not sure how they'll deal with it, but let's take one crisis at a time, huh ??

Perhaps, your country could give us the money for taking this appraoch ??

I lost you there Gino.....where are you going with this?

 

[James Burke]

As part of my quarantine duties, I've been watching the series "Industry on Parade" on YouTube. It was produced by the National Association of Manufacturers from 1950 to 1960. Life may have, or may not have, been more difficult then....but it sure seemed simpler and a lot more "people focused".

People took pride in their work...and they didn't dress like a bunch of slobs either. The only tattoos you'll see will be on a war vet's forearm...no tramp stamps, nothing dangling from eyebrows, noses, lips or any other body part.

Basically, it was the forerunner of today's "How It's Made", but it conveyed a far deeper, and cohesive, message for our nation...at a time when it was needed most.

Public service announcements at the end of each episode exhorted every viewer to take personal responsibility by SAVING, INVESTING, AVOIDING DEBT and HOLDING OUR GOVERNMENT OFFICIALS ACCOUNTABLE.

In my opinion, they should be required viewing for kids nowadays.

Red, White & Blue Trigger Alert: They're anti-Communist and anti-Socialist.


JB

 

[Gino]

I lost you there Gino.....where are you going with this?

I merely answered you and then asked a question back atcha.

 

[Johnny Best]

Is Canada going to do a bailout for their citizens?

 

[Bobby H]

Yeah, the Canadians are looking at it.
https://www.bloomberg.com/news/arti...r-stimulus-in-canada-s-bid-to-salvage-economy

They are printing money, it's called quantitative easing. In 30 years that 2 trillion would be more like 20 billion

Quantitative easing is a little more complex than merely printing money. It's really about making it easier for businesses to borrow money. In the Great Recession of the 2000's the US government combined QE practices (buying t-bills from other banks, mortgage backed securities, etc) with buying debt from all sorts of threatened companies, banks in particular, to keep them afloat. We would have had a severe depression if the government had just stood aside and let banks bear the full brunt of consequences from their stupidity in the 2000's.

Quanitative Easing still runs the risk of sparking inflation. It's really a gamble to jump-start an economy. If growth doesn't happen the consequence can be stagflation, inflating prices with little if any economic growth or just continued recession. The era around 1980 was a pretty notable period for that.

Public service announcements at the end of each episode exhorted every one to take responsibility by SAVING, INVESTING and AVOIDING DEBT.

I personally do all of those. On one matter, I really hate credit card debt and how those companies calculate interest and compound it daily. So I have the policy to NEVER carry balances on any cards.

I wish I would have listened to my gut in late January when this pandemic was really starting to show potential and adjusted my investments. My IRA so far has taken as big a financial hit (on paper) as it did in the Great Recession.

I have a decent amount of cash saved, which unfortunately could turn into a rainy day fund if matters get substantially worse. But I also worry about the government embracing inflation and thus ruining the value of that savings. OTOH, everyone would have to get paid more on some sort of proportional level. So an existing home mortgage might end up being cheaper in one respect. The trick would be not taking on any new debt. Interest rates tend to rise pretty sharp in an economy with high inflation.

 

[rossmosh]

This is actually a big problem with the recent politics and economic agenda. In 07/08, we had to do crazy things because there was a massive global recession. Generally speaking, most of the economy bounced back by 2014-2016, depending on what metric you want to use. When the economy is doing well, you typically increase interest rates, raise taxes, and generally speaking try to pay off what you borrowed over the last 8 years.

Instead, we actually cut taxes, lowered interest rates, and increased spending. It was the exact opposite of what any normal economist would recommend. So going into this recession, we have no tricks to stimulate the economy. Lower interest rates? Okay, they were already low. Lower taxes? They're already pretty damn low. Tax businesses? You're going to do that when they're unstable? Not a good idea.

So the answer to your question is like many of suggested, we're going to kick the can down the road and deal with it never.

 

[Texas_Signmaker]

QE is simply put printing money.

This is actually a big problem with the recent politics and economic agenda. In 07/08, we had to do crazy things because there was a massive global recession. Generally speaking, most of the economy bounced back by 2014-2016, depending on what metric you want to use. When the economy is doing well, you typically increase interest rates, raise taxes, and generally speaking try to pay off what you borrowed over the last 8 years.

Instead, we actually cut taxes, lowered interest rates, and increased spending. It was the exact opposite of what any normal economist would recommend. So going into this recession, we have no tricks to stimulate the economy. Lower interest rates? Okay, they were already low. Lower taxes? They're already pretty damn low. Tax businesses? You're going to do that when they're unstable? Not a good idea.

So the answer to your question is like many of suggested, we're going to kick the can down the road and deal with it never.

Your thing about interest rates is a little off. You raise interest rates to counter inflation which was a key element missing during this whole expansion period. Wages didnt go up enough and we had almost 0 inflation for a few years. Only recently did it kind of start moving in that direction. Fed tried to raise rates and that quickly backfired two Christmases ago. The recession we had in 08-09 was a financial system problem and the recovery is not the same after those, It's long and slow.

 

[gabagoo]

Is Canada going to do a bailout for their citizens?

YUP

 

[Bobby H]

The United States got into the really bad habit of lowering interest rates, particularly the Federal Reserve lowering the overnight borrowing rate, as an any-means-necessary measure to avoid a recession. That's what Alan Greenspan did back in the early 2000's. We had the dot-com bubble burst at the end of the 1990's. Just as the economy was getting a good recovery going the 9-11 thing happened and war followed. Another recession seemed likely. The act of the Fed keeping its rate at or near zero helped fuel the speculative bubble in the housing industry. Removal of other regulations also helped fuel the housing bubble.

Recessions are a naturally re-occurring thing in the economy. Sometimes you just have to let a minor one play itself out. Our government didn't have the stones to do that in the early 2000's and paid for later with a far bigger recession later in the decade.

 

[GAC05]

They can go back to the real gold standard and just get all the 3d printer guys to pump out a bunch of new gold coins to cover the debt.

 

[ikarasu]

Is Canada going to do a bailout for their citizens?

Canada is doing a huge bailout.... we dont have as many people as USA, so I'd say we can offer our citizens better.

Right now the government will pay 75% of all wages if you dont fire your employees as an incentive to keep them on and not lay them off. I like this because the business bares some of the brunt, but the incentive to keep them is pretty good.

If you are laid off, it's something like $2000 per person per month the government will give you, as well as other stuff.

The government is backing all small business loans up to $40,000 - interest free for 1 year... and if you pay it back within the year...they will knock 25% off of your loan as free money.

Our government has said right now they will take care of the citizens and make sure everything is ok for us and worry about the Economy later.

Is that smart? I dont know. Hopefully things work out... I know a lot of people who will be abusing the system... and maybe it'll destroy our Economy more than we can recover... but it's good to know in a situation where millions are losing their jobs, theres options that wont bankrupt business's or cause us to lose our houses.