Don’t Know Much About Economics…

Guest Blog by Jennifer McKitrick

[cross-posted at Jen Mc’s Blog]

Don’t Know Much About Economics…

But as far as I can figure…

The plan of the Trouble Asset Relief Program is that the US government borrows money from China so that they can lend it to banks so banks can lend it to consumers/taxpayers.

(China should just open up banks in the US and lend directly to consumers. Cut out the middle men! Especially ones that spend the money on spa retreats for their clients.)

So basically, the government is putting taxpayers in debt so that money can be lent to same taxpayers, with interest.

Rube Goldberg cartoon

If enough taxpayers pay back the bank, the bank can pay the government, and the government can pay back China, and if there’s any left over, it will “benefit the taxpayer,” whatever that means.

(Another short cut: If you really want to benefit the taxpayer, reduce the amount that they have to pay on their loans now, rather than giving them a promise of a cut of the profits made off their own interest payments.)

Now, if not enough taxpayers pay their loans, the bank can’t pay back the government, but the government still has to pay back China, so where will they get the money? From taxpayers! Which taxpayers? The ones who were unable or unwilling to pay their loans? Unlikely. For the others (and subsequent generations), after they’re done paying back any money that they may have borrowed, they still have to pay back the money that someone else borrowed. That sounds less like being financially responsible and more like being a sucker.

Another thing…
If the Big 3 are good for the money, why can’t they get regular loans?

Credit is tight, I know. But the government already gave billions to financial institutions so they could make loans. I guess the banks figure they shouldn’t risk the taxpayer’s money that way. That would be irresponsible!

But what do I know?

Jennifer McKitrick is Associate Professor of Philosophy at the University of Nebraska – Lincoln, and Vice-President of the Molinari Institute and Molinari Society.

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3 Responses to Don’t Know Much About Economics…

  1. Mike December 10, 2008 at 5:20 pm #

    What’s so hard to understand? One hand washes the other! With dirt.

  2. Sag December 11, 2008 at 7:52 pm #

    “Credit is tight, I know. But the government already gave billions to financial institutions so they could make loans. I guess the banks figure they shouldn’t risk the taxpayer’s money that way. That would be irresponsible!”

    Ha ha ha. Great point. Even the critics of the bank bailouts aren’t mentioning that one. It’s priceless. I will have to use that one.

  3. Kevin Carson December 11, 2008 at 10:31 pm #

    Along the same lines, if government’s going to create fiat money out of thin air, why not just deposit it directly into citizens’ bank accounts along SocCred lines, instead of delegating the power to banks to *lend it at interest* out of thin air?

    I’m not in favor of either one, but the SocCred alternative certainly isn’t any *more* statist, and would weigh less heavily on us.

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