The View From 1776

Stimulus Package Analogy

George Reisman explains that economic stimulus programs administered to an out-of-balance economy are analogous to giving additional doses of a chemical stimulant to a sleep-deprived person who needs, instead, rest and recovery.

With regard to the nature of true savings vs consumption, see Savings?, an article that I posted April 05, 2007.

Posted by .(JavaScript must be enabled to view this email address) on 02/26 at 11:16 PM
  1. Reisman agrees Paul Krugman that the banks that are under-capitalized (which he calls "Zombie Banks") should not be propped up by our tax dollars. They should be taken over by the FDIC.

    Reisman says, "Yet before trust can be established, the actual, market value of the banks' assets must be established, even if it serves to bankrupt many of them."
    Posted by .(JavaScript must be enabled to view this email address)  on  02/27  at  01:05 AM
  2. Who funds the FDIC?
    Posted by .(JavaScript must be enabled to view this email address)  on  03/03  at  05:47 PM
  3. The banks pay an insurance premium to the FDIC and they then loan those premiums to the Federal Government, like other trust funds and get interest paid to them.

    Thus, when a bank folds, the FDIC sells the IOU's back to the Federal Government for the amount they loaned and the Federal Government borrows some money to pay them.

    Thus, all FDIC payouts are covered by new debt. The Government has said they will back the FDIC so no depositor is left out even if the FDIC goes broke. They will just borrow even more to cover any banks going under.
    Posted by JanPBurr  on  03/05  at  05:31 PM
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