how is the US going to pay for the relief package?

[frayne]

Probably not the time to ask the question but how is the US going to pay for this six trillion dollar CVD-19 stimulus package ?

 

[copyright1997reloaded]

Probably not the time to ask the question but how is the US going to pay for this six trillion dollar CVD-19 stimulus package ?

It's magic!

The treasury will have lots of debt offerings, 10 year, 20 year, 30 year, maybe even some new and improved 50 year bonds.

The federal reserve will "buy" those bonds and add them to their ledger.

All good.

 

[RunningBum]

Could you please change the title to at least some attempt at being descriptive?

 

[Aerides]

temp changed but OP pls post in thread if you have a better idea and we'll change again.

 

[Aerides]

also, mod had decidedly off:

Not Now Karen

 

[davebarnes]

Fairy Dust.

Or

Your grandchildren’s taxes.

 

[aja8888]

Treasury Department's flat currency printing press. Last few years its been running 24/7/365.

 

[copyright1997reloaded]

Eventually, the game can end very badly.

If the US loses its position of the reserve currency, then will will no longer be able to import all those nifty things using $ denominated trade deals.

So how would we have that happen? Well, if you were a foreign trading partner - and you knew that there were suddenly $6 trillion or so extra dollars floating around and less US production of goods that can be exported...well maybe it might be better to take some of those $ that you are holding and convert them to other things.

 

[Nemo2]

How? It's obvious. Bake Sales. Lots, and lots and lots of Bake Sales.

 

[Teacher Terry]

I worry about it but unfortunately it’s our kids burden.

 

[Hyper]

6T..?? Thought I had read 2.2T

 

[RobbieB]

Same way we pay for everything;

Lower taxes.

 

[NW-Bound]

For comparison, Italy which has 60 million people against the US's 330 million is talking about a 2nd 25 billion euro (US$28B) relief package. That's only US$933 per person.

Here, we are doing US$6,700 per person. Something to think about.

How? It's obvious. Bake Sales. Lots, and lots and lots of Bake Sales.

Darn, I am going to be fat eating that much carb. And my blood glucose will go through the roof. And they say diabetes is a comorbidity of COVID-19.

Are you sure this is a good idea?

I worry about it but unfortunately it’s our kids burden.

I think I will have to pay my share via higher taxes in the future, for my SS benefits on top of the IRA withdrawal. It's OK.

 

[Closet_Gamer]

It is some seriously cheap debt that's being issued.

30 year treasury yields are 1.4% right now. $2T is nothing to sneeze at, but its essentially free money. Its $28B of annual interest. Inside of of a $4.8T federal budget. Very small price to pay for putting the shock paddles on the chest of the world's largest economy.

I'm not saying this is good or smart, but this would be a very different situation if rates were 5-6%.

 

[Helen]

It is some seriously cheap debt that's being issued.

30 year treasury yields are 1.4% right now. $2T is nothing to sneeze at, but its essentially free money. Its $28B of annual interest. Inside of of a $4.8T federal budget. Very small price to pay for putting the shock paddles on the chest of the world's largest economy.

I'm not saying this is good or smart, but this would be a very different situation if rates were 5-6%.

But what happens when interest rates go up? It seems like we just keep propping up the economy and the problem/bubble keeps getting bigger. At some point the music is going to stop.

 

[Nemo2]

But what happens when interest rates go up? It seems like we just keep propping up the economy and the problem/bubble keeps getting bigger. At some point the music is going to stop.

High inflation/devaluation?

 

[Closet_Gamer]

But what happens when interest rates go up? It seems like we just keep propping up the economy and the problem/bubble keeps getting bigger. At some point the music is going to stop.

I agree that at some point it has to normalize and that will be quite painful.

But at the margin, its seems a much better choice than not doing it and cratering a lot of innocent people or cranking taxes on an already strained economy to pay for it.

You're right tho...at some point you have to pay the piper.

 

[latexman]

Print "more money, more money, more money".

 

[donheff]

For comparison, Italy which has 60 million people against the US's 330 million is talking about a 2nd 25 billion euro (US$28B) relief package. That's only US$933 per person.

Here, we are doing US$6,700 per person. Something to think about.

EU countries don't have sovereign currencies so they can't just print their way out of it like we can. Or maybe it will be attempt to print our way out of it for us. Individual EU countries face the problem Greece did during the financial crisis - they rely on the actions of bureaucrats in Brussels and the inclinations of Merkle and a few others with outsize influence.

 

[DrRoy]

6T..?? Thought I had read 2.2T

The 6T includes a lot of potential discretionary lending by the Federal Reserve. On the payment issue, I expect the Fed will cover (buy) much of the debt.

 

[Rianne]

Set up U.S. Govt. charity, tax deductible of course.

 

[Tiger8693]

How? That is the $1MM dollar question.... potentially for every citizen now.

 

[Fermion]

Just think of it as if the USA got approved for a reverse mortgage

 

[MichaelB]

But what happens when interest rates go up? It seems like we just keep propping up the economy and the problem/bubble keeps getting bigger. At some point the music is going to stop.

History shows at some point that there will be a reckoning, the level of indebtedness will be resolved, there will be pain, and it won’t be evenly distributed. No way to know when, how, or who, but it doesn’t look imminent. It pays to be careful, though because in the past, retired people have suffered badly.

Michael Pettis (an economist everyone should follow) has a simple and straightforward way of looking at debt. He sees it as either productive or non-productive. Productive means it increases economic activity that is sustainable, meaning the level of activity remains higher after the money was spent. Non-productive is like the bridge to nowhere or an empty building. As soon as the spending stops the economic activity goes back to the level it was at previously and the spending itself did not contribute to ongoing economic activity.

I’d say this is the best $2T we’ve ever spent.

 

[Markola]

6T..?? Thought I had read 2.2T

I read the mechanism is roughly $500 billion in Treasury loan guarantees to the Fed, which then has the backstop protection to in turn issue roughly $4 trillion in loans to businesses. Most of those loans will be repaid eventually, so the Fed needs just $500 billion to back its $4 trillion. I haven’t seen the $6 trillion number anywhere.

I’m not worried about the dollar no longer being the world’s reserve currency. What is the alternative? Euros? Those proved flimsy in the Greece and Spain crisis. Swiss Francs? Not enough of them to run the world. The dollar remains the only choice.

No one likes to grow the U.S. debt but it is still lower/capita than most developed countries.p, so there’s room to deal with the pain and suffering out there by directly paying workers. I personally just can’t stomach the bailouts of airlines and Boeing and others to come who spent their giant tax cuts on dividends and share buybacks and now cry Uncle Sam. They should go into Chapter 11.