Economic Stimulus Rebate

[notoppings]

What will you do with your rebate?

Do you think this rebate will actually help the economy?

So they started sending out the rebates according to your last two digits in your SSN, if you Efiled and had it directly deposited you could have received your rebate as early as April 28th if you had your refund mailed to you they start sending those checks out in May. So do you have any plans for these extra funds? Will you do what the government wants and just go spend it? What are your thoughts?

[curiousjane]

I e-filed. Got my "check" direct deposited on April 28. $600 makes me happy, but it is pretty much already spent on fixing my car (paying off the credit card bill associated with the repairs).

I don't know if it will help economically, though. Wait. I take that back. There will be a lot of people, like me, who are only going to use the money to pay for bills or groceries, since gas is eating up all of our spare income. That's not really boosting the economy. Those bills would have to be paid or those groceries would have to be bought, anyway.

There will be others, however, who see $600 in their bank accounts, think "oh! goody! money!" and will hit up the nearest Best Buy. So it might help a smidge.

And looky here! There's people at MSN who agree with me:
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But I have a feeling this is going to be a lot like asking if the water level will rise when an ice cube melts. (No.)

[notoppings]

I think you're right some people will go out and buy that new TV and will probably have to charge the difference on a card, do you think that will help at all, I mean some people are already struggling to make ends meet and then they go and take on a little more debt in order to get the set that the salesman will upsale them to.:undecided:

[BallentineChen]

I read if we spend it on groceries or gas, the money just ends up going to S. America or OPEC. Elliot Spitzer was way ahead of us, spend it on hookers.

[thod]

Same with the TV example. It goes straight to China/Japan it wont be keeping American factory workers in a job. Only the US would borrow money and hand it out, it is borrowed money. The truth is the US needs to raise taxes to cover its spending and pay of its debt. All this does is devalue the dollar, which raises prices since the US exists in world markets.

The latest idea is a remove gasoline tax for the summer. Another smart idea, consume more precious resources, borrow more money, and lose the gain in price as the dollar tanks.

I wonder if anyone in the US understands economics. Its all flying helicopters throwing out cash in order to get smiles. We all know it means inflation. Its seems more and more likely that the US is heading for stagflation like the seventies. Prices going up, no increase in wages or business.

They should just let the bad debtors fail and have a fire sale of their assets. Once its all cleaned up we can start growth again. The fed should be raising interest rates to defend the dollar and the government raising tax to cover its spending. It will mean a recession but thats nothing to the pain of stagflation.

[Tenacious B]

I'll be putting it towards my expenses, but I'm moving soon so I'll be spending quite a bit more than usual anyways.

It will be a temporary blip on the economic radar, but I will never complain about getting some of my money back. I can use it much more wisely than the government ever would.

[meanlittlechimp]

The latest idea is a remove gasoline tax for the summer. Another smart idea, consume more precious resources, borrow more money, and lose the gain in price as the dollar tanks.

I wonder if anyone in the US understands economics. Its all flying helicopters throwing out cash in order to get smiles. We all know it means inflation. Its seems more and more likely that the US is heading for stagflation like the seventies. Prices going up, no increase in wages or business.


It's absurd, every economist worth anything knows it's absurd, Obama is the only one that seems to get it. To view links or images in this forum your post count must be 2 or greater. You currently have 0 posts.

McCain, that rickety old crackpot, has lucky ties, a lucky compass, carries around a lucky nickel, quarter, and penny with him. He also has a lucky feather, and makes all his staffers knock on wood (no joke). He won't throw a hat on his bed. McCain was nervous that he had missed seeing a movie (any movie) the afternoon of primary day because he has a 20+ year superstitious tradition of doing so.

It's been public information since he ran against Bush, and he's not shy about admitting it. I think it speaks volumes on the sophistication of his thought processes. I don't think he's really paying attention to technical rguments about economics - he has faith and his lucky charms.
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[PRBori]

I haven't gotten mine, but I'm certainly looking forward to it. I plan to pay off some debts in order to better my credit score by summer so that I can purchase my home... I'm tired of wasting my money on rent right now.

By mid, end of the year or beginning of next year are the best time to buy. Prices for houses are really low... I've being looking in my area and there are plenty of townhouses 3+ bedrooms under 100K, but I'll be looking at Single Family Homes which you can now find around 200K, so I'm hoping by those times I can find some cheaper...

:p

[Jgib5328]

Ha, I'm getting a $325 check in the mail, and it's coming at a wonderful time. Both Mario Kart Wii and GTA 4 have come out, so I'll buy those. I love being a college kid with no real responsibilities.

[PRBori]

Ha, I'm getting a $325 check in the mail, and it's coming at a wonderful time. Both Mario Kart Wii and GTA 4 have come out, so I'll buy those. I love being a college kid with no real responsibilities.

Good for you... although I would consider putting the money to better use. Back in the days when I was a teenager I never though about saving much... now that I'm older I wish I did.. nevertheless, is never too late or to early to make good decisions in life when it comes to finances...

[Jgib5328]

Good for you... although I would consider putting the money to better use. Back in the days when I was a teenager I never though about saving much... now that I'm older I wish I did.. nevertheless, is never too late or to early to make good decisions in life when it comes to finances...

All of my money that I make goes to my education, I don't have any left to save. Once I graduate, I will begin investing.

[PRBori]

All of my money that I make goes to my education, I don't have any left to save. Once I graduate, I will begin investing.

I understand college this days is too expensive, nevertheless you'll be surprise what $25/every two weeks can do for you. And if that's too much $50/month in an account you have no access is always a good idea.

Investing is good, but risky at times...you need to have a plan where you are not risking too much just in case. A savings account that earns high interest rates is a good way to go for starters...

[curiousjane]

My INTP best friend just sent me this ... funny ... BUT still food for thought ...

As you may have heard, the IRS rebate checks will soon be in the mail. The administration wants you to stimulate the US economy by cashing the check and spending it. Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:

If we spend that money at Wal-Mart, all the money will go to China.

If we spend it on gasoline it will go to the Arabs.

If we purchase a computer it will go to India.

If we purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala.

If we purchase a car it will go to Japan.

If we purchase useless crap it will go to Taiwan.

And none of it will help the American economy.

We need to keep that money here in America. The only way to keep that money here at home is to spend it at yard sales, since those are the only
businesses still in the US.

(Just realized there are many of these countries represented on the forum. No offense intended! Just pointing out the bizarre situation of our present US economic system. We don't have much local production. Everything is imported.)

[DrEast]

The fundamental problem with the rebate checks is that they don't do anything to reduce government spending... they're just more deficit. Wealth redistribution is increased, not decreased.

[Linza]

DrEast is right. These checks are essentially borrowing money from borrowed money. This money doesn't exist. All the money you're getting from the government is only serving to devalue the money you already have, so essentially the government is making you poorer. Unfortunately, most of the people recieving this money don't have the education in economic matters necessary to realize this, so everyone will take the money and be grateful for what is really hurting them.

If I get money from the government, I'm sending it back with a note that says, 'you don't have this money.' I encourage you to do the same.

[Marcus Brutus]

DrEast is right. These checks are essentially borrowing money from borrowed money. This money doesn't exist. All the money you're getting from the government is only serving to devalue the money you already have, so essentially the government is making you poorer. Unfortunately, most of the people recieving this money don't have the education in economic matters necessary to realize this, so everyone will take the money and be grateful for what is really hurting them.

If I get money from the government, I'm sending it back with a note that says, 'you don't have this money.' I encourage you to do the same.

Its simple economics: its a fiscal expansion to try and take the bottom out of a downwards cycle in the economy. Its just trying to spur consumer spending to flatten out the economic cycle that is on a downwards trend. Sure it will have an inflationary effect, but inflation is not the chief concern in the current US economy, consumer confidence is.





Marcus Brutus added to this post, 2 minutes and 34 seconds later...

Economics is all about expectations... if people perceive that they have more money then they will spend more... so you will have a short term spike in demand thus stimulating the economy. Which is definitely what the US economy, from my understanding (I am an australian) needs at the moment.

[meanlittlechimp]

Its simple economics: its a fiscal expansion to try and take the bottom out of a downwards cycle in the economy. Its just trying to spur consumer spending to flatten out the economic cycle that is on a downwards trend. Sure it will have an inflationary effect, but inflation is not the chief concern in the current US economy, consumer confidence is.


It's a way to pander to voters, hoping to increase their popularity during election time. It's an old trick laughed at by anyone that knows anything about economics.

Real fiscal stimulus (popularized by Keynes) is spending government monies to create jobs or improve infrastructure. The idea being that it will hopefully spur real long term growth; NOT buy off ignorant voters by borrowing money from future generations.

This is just a cheap political ploy that does nothing.

[DrEast]

Although no economist, I'm more of a fan of the Austrian school than the Keynesian. That said, "stimulating the economy" is really a fairly empty term... banana republics everywhere know you can have a truly excellent economy on paper while people starve.

[meanlittlechimp]

Although no economist, I'm more of a fan of the Austrian school than the Keynesian. That said, "stimulating the economy" is really a fairly empty term... banana republics everywhere know you can have a truly excellent economy on paper while people starve.

That's more due to unequal income distribution. Banana Republics have this problem because most of them are dictators propped up by the US, who sell off their natural resources below market value (screwing over the own populace). The reason it goes on is we send our military advisors, weapons and CIA to stomp down any resistance to this model and call them "communists"; if they attempt any real reform.

[notoppings]

I notice that several people are saying if you buy certain items that the economy of foreign countries will be the only benefactor. I don't completely agree with this, although the end dollar does end up abroad it first had to go through local economies without those extra dollars going into your local retailer the clerk that works there may be layed off fired out right for lack of trade. Then you also have to think of the products travel before it even gets to the store.

Some store has a buyer. The buyer has to store the product. The product is assigned to a shipping broker. The broker has to arrange shipment. The truck driver has to haul it incurring cost of fuel, food, tolls and much more. This is just a small list of the travels of that big ticket item. If not purchased several people stand to loose their job.

Seems like a stimulus to me. The idea is to get people to spend that cash so that the service industries can keep their employees, I think.

[meanlittlechimp]

Seems like a stimulus to me. The idea is to get people to spend that cash so that the service industries can keep their employees, I think.

It is technically a stimulus. But it's not enough of one to have a significant impact on the economy except to make voters feel better temporarily. It's also a stimulus to get mortgages on houses you can't afford. But when then bills come later, which they will, there will be a retraction with interest....

Real fiscal stimulus packages provide GROWTH so when the bill comes, you'll have made additional monies to offset the interest rate occurred on the debt. For example, building a high quality broadband infrastructure is an expenditure or fiscal stimulus, but the growth caused by the industries it spurs (faster information transfers and other beneficial byproducts are created); which will offset the monies required to build it, in theory anyways.

The gas rebate does not fall in this category, which is why even conservative economists ridicule it. Followers of Hayek, Friedman, Keynes, everyone. It's just borrowing money on credit, that someone has to pay later with INTEREST. These dumbass politicians don't care about LATER, because they just want to pander to voters to get elected NOW.

There is sometimes a confusion with moneterist expansion or stimlus; which is done by lowering the interest rate, which in turn expands money supply - which is what the Fed has been doing for quite some time in recent years.

[Marcus Brutus]

It's a way to pander to voters, hoping to increase their popularity during election time. It's an old trick laughed at by anyone that knows anything about economics.

Real fiscal stimulus (popularized by Keynes) is spending government monies to create jobs or improve infrastructure. The idea being that it will hopefully spur real long term growth; NOT buy off ignorant voters by borrowing money from future generations.

This is just a cheap political ploy that does nothing.
Oh i certainly agree that it will not effect the economy in the long run. Price levels will adjust over time so that the economy will go back to its initial long run output level. However, as i said above, it does achieve a short term increase in output as there is a lag between the increase spending by consumers and the resulting change in price levels. And this increase in output is being timed to coincide with a downwards trend in the economy with the aim of flattening this trend out.





Marcus Brutus added to this post, 2 minutes and 9 seconds later...

p.s. as stated above, i am not american and do not know the full implications of the policy; just going from my observations of the economic cycle such a fiscal expansion seems timely.

[Linza]

Inflation should be the major concern. American consumer confidence can only do so much in an economy which depends so heavily upon the economies of other nations. The value of the dollar has dropped enormously in a very short period of time; in eight years, we went from one of the top valued currency, to being about equal to the Canadian dollar. Considering the sheer size difference between the US and Canadian economies, this should be alarming. I'm certainly alarmed, that's for sure. However... as always... should rarely dictates what is.

[Marcus Brutus]

Inflation should be the major concern. American consumer confidence can only do so much in an economy which depends so heavily upon the economies of other nations. The value of the dollar has dropped enormously in a very short period of time; in eight years, we went from one of the top valued currency, to being about equal to the Canadian dollar. Considering the sheer size difference between the US and Canadian economies, this should be alarming. I'm certainly alarmed, that's for sure. However... as always... should rarely dictates what is.
Well, if the inflationary pressure of the fiscal expansion is significant, then the federal reserve will have to raise interest rates (the reserves primary policy is keeping inflation within a certain bracket). Raising interest rates will strengthen the US$ as US Treasury notes will have better returns and thus attract more foriegn capital inflow. Indeed, interest rate disparity between economies is the primary driver of exchange rates - the rather low interest rates in the States at the moment is one of the primary causes of its weakening dollar.

[QuickSilver]

Jeeeeeeeez - I thought you guys were INTJ's? "Where's the beef?" (I mean data)?

Data compiled from:
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-White House
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-Bureau of Economic Analysis
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--------------------------------------------------

Correlation to Growth Manifested in *subsequent year's* Real Gross Domestic Product (RGDP) for time period 1987-2005:

Monetarist Actions:


0.515099433 Increase Inflation (%/Year) (Monopoly Money!!!)

-0.016256207 Increase Interest Rates (FedFunds) (Do the Vockler!!!)

0.016688154 Increase M1 Money Supply Size (More $ in Checking Accounts)

-0.420615458 Increase Transaction Rate Across M1 (Swirl $ through checking accounts Faster, with more Zest!)

-0.074710166 Increase M2 Money Supply Size (More $ of all above, *Plus* Savings Accounts)

-0.093831638 Increase Transaction Rate Across M2 (Swirl $ through Savings accounts Faster, with more Zest!)

-0.095105977 Increase M3 Money Supply Size (More $ of all above, *Plus* CD's, EuroDollars, Repurchase Agreements, etc)

-0.01008648 Increase transaction Rate Across M3 (Swirl $ through CD's (etc) Faster, with more Zest!)

-0.035477576 Increase Total # of Electronic Transactions (Total Swirl)

0.350909762 Increase GrowthRate of # of Electronic Transactions (derivative of Total Electronic Transactions)

-0.091171759 Increase $ Value Total Electronic Transfers

Government Fiscal Actions:

0.057242337 Increase Deficit Spending

-0.106305089 Increase Total Federal Tax Load
-0.367730866 Increase Social Security/Retirement Taxes
-0.053305592 Increase Taxes in Expected Manner (as per budget)
-0.57653446 Increase Taxes in UnExpected Manner (off-budget)

Help People Buy Mo' Oil

-0.30721058 Increase Portion of all money spent on oil

---------------------------------------------------

Note on Inflation: Inflation correlates with growth, but I think that inflation is a symptom which can have many underlying causes:

Good Cause:

- Growth can cause inflation, such as when certain key resources become bottlenecks & price pressure on those resources increases, stimulating increased production (real growth).

Good Example: People begin to consume foods containing cinnamon, but few cinnamon trees exist, so prices skyrocket. Consequently innovators realize that cassia can be substituted, and prosperity continues as more cinnamon is cultivated in the background.

Bad Cause:

- Printing dollars like monopoly money can cause inflation, which in that case may "feel" like growth, but will not actually improve standards of living in the long run.

Bad Example:

Post WWI, Germany printed huge amounts of money with which to pay off punitive Allied charges. Eventually it took a wheelbarrow of cash to pay for a loaf of bread. This destroyed the ability of the German economy to function, and didn't really end up paying anybody anyhow.


---------------------------------------------------


So, I'd say, if absolutely need be for an emergency (and I make no claims on what might qualify) you could cut taxes and use deficit spending to cover it.

Version 1.0 suggestion:

Just for fun, imagine if we rolled the taxes back a bit and made the hippies happy by using deficit spending to build:

1) Massive solar->[Electricity & AlgaeBioDiesel/Hydrogen or any non-crop biofuel] energy facility in the Southwest
*must use economies of scale to beat coal-electricity prices and petroleum gas/diesel prices
*must be designed to allow sectioning into modules which can be privatized to force competition

2) New ultra high voltage DC power transmission infrastructure coast-to-coast (no more blackouts, can distribute the power for sale)

3) Complimentary nuclear for night-time power (if this scares you, go get 1 degree in nuclear engineering and apply as necessary until anxiety resolves).

4) Research into storage mechanisms for solar power (for eventually use as night time power)




I'd only agree to deficit spending for a scenario like that because:

-Nearly all of that $$$ would stay in the US (great for short term, "ok" for long term)

-In the long-run, reducing bleed-out to foreign oil would probably counteract the short-run inflationary impact [you might want to raise interest rates a tiny bit, but as Marcus Brutus says foreign capital would flow in and strengthen the dollar, which would help us to buy oil in the short term to counteract the supposedly "contractionary" effects]

-Unemployed people could be hired to work on the many projects that would be involved

-In a few years we'd have *super-cheap* energy which would *really stimulate* our economy (and tax revenue along with it), & we could then pay the deficit back down (as long as people don't get greedy and try to use the enhanced revenue for enhanced "gimme gimme" programs [eg: transfers & entitlements such as Social Security - I specifically included that tax in this study so you could see just how damaging it is]).



-QuickSilver

[Marcus Brutus]

Lol, maybe QuickSilver... although i wonder if you might run into problems concerning capacity restraints... and, in the end, all well in theory but good luck getting that past the oil lobby =P

[vad1981]

somehow i dont think high voltage dc lines are a great idea - just like having a nuclear reactor in every garage...

[thod]

Inflation is a backward way of looking at things. Prices are not rising, it is the dollar that is falling.

The nature of production is mostly deflationary. A farmer that could produce only enough food for his family can now produce enough for 1000 families. The price of food should be falling. The same is true with most industrial products with production efficiency increasing, the price goes down.

The counter to this is the increased money supply. Yet like all fiat systems that have ever existed the temptation is to print too much money.Since the number of dollars is rising faster than production gains we get inflation.

It is popular to believe that government spending is financed from taxation. The bulk of government spending is not financed in this way, it is financed from borrowing. The government borrows money from the fed that prints dollars out of thin air. When the time to pay them back comes around the government has no money. So it takes another loan from the fed to pay back the first and few more to spend. The fed has an infinite amount of dollars. The government thus keeps taking out ever larger loans leading to the spending deficit.

Paying for expenditure through taxation means congressmen do no get elected, so they are happy with this debt system. They get to spend without taxation. The losers are anyone that holds dollar savings. The extra dollars dilute the spending power of the dollar. The workers are always lagging the extra dollars and so their real wages ever decrease.

Now you may wonder why the Chinese are happy to send products to the US for declining dollars. They take the dollars and buy T bonds, which are interest bearing dollars. This keeps the value of the dollar up and the yuan down allowing exports to the US. Their objective is the industrialization of China. It means jobs move from expensive US, to cheap China. At some point they will stop doing this and lose a lot of cash as the dollar plummets. They dint care, they will have the industrial economy. The US will have nothing but debts and no means to pay it.

The US dollar is one way bet downhill. You have seen nothing like what will happen when the foreign investors pull out, then you will see hyper inflation destroying all your savings.

It may have escaped your notice that it now takes a 2 income family to have a lower lifestyle than your father could provide with one income. The US worker is being screwed and will reach parity with the Chinese worker. Under the current system we have a transfer of wealth to the top. The rich get richer and poor poorer. This is due to mechanics of the fiat system. Since you keep electing rich guys to office expect it to continue.

I would not pay off debts with this cash unless they are expensive debts. Since mortgage debt is less than inflation it is an income source. The best thing to do with it is to buy something like gold which holds its value. Saving it in the bank means it loses its value to inflation.

[QuickSilver]

somehow i dont think high voltage dc lines are a great idea - just like having a nuclear reactor in every garage...
It sounds like you think High Voltage DC would increase our risks. If that impression is correct, please consider that they would likely incur little to no additional risk relative to the high voltage AC lines which they would replace.

High Voltage DC would be, in nearly every way, a more efficient & lower risk system that which we already use.

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As to the issue of nuclear power, I think you've chosen your example well; due primarily to radioisotope diversion risks I cannot defend the use of homes powered by a radioisotope powered fission reactor "in every garage", at least none based upon any technology of which I'm aware.

Hence the need for a power transmission infrastructure (hopefully using HVDC, which is now available because of new & cost-effective ways to convert AC->HVDC->AC), so that the nuclear & solar (which is also nuclear, by the way) can be created on a large scale and cheaply distributed where/as the market demands.

-QS

[meanlittlechimp]

Nice post Thod.

I know 98% of the populace doesn't know anything about economics, but I wonder how many of our congressman do. Printing money is always the easy solution for state planners, because the voters don't "see" the money being printed and the national debt skyrocketing (it's too abstract for most). They'll scream bloody murder if they had to pay an extra 3% tax, however, because that's easier for them to get.

They just want to keep spending and consuming, without paying for it. It's like the sub prime fiasco but on a much larger scale. If the Chinese decided to pull out of T-bonds, and our economy goes into massive inflation, whomever is in office then - will get the blame, not the predecessors who caused it.

It's absurd to think that in the "wealthiest" country in the world, every single American has borrowed approximately $4,000 EACH from the Chinese (and rising). Your average, 2 car owning, 3,000 square foot home owning American is borrowing $4K from Chinese factory workers, who fit an entire family into a studio apartment. It's perverse when you think of it in those terms, but it's exactly what we're doing!

The US consumes much more than it produces while the Chinese consume only half of what it produces. This cannot go on indefinitely and when the merry-go-round stops, it ain't gonna be pretty.

[QuickSilver]

No no no, you don't understand:

What about the God-given right to earn $75.86 right out of high school, pulling levers down at the local plant!

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Only chumps settle for unions that just make work safe!
Everybody knows you've got to strike, riot & vote in blocks until you get what you want:


-= A "middle class wage" for a skill-set a teenager can acquire! =-


College is for suckers!!!

Why is that?

Haven't you noticed that the rest of the world is a smoking post war ruin of bombed out factories and scorched earth?

We have 50% of global industrial capacity, oil measured by the metric assload, and if all else fails we've got: the bomb...



Um, wait a minute... that was back in 1945...

Yah, so it looks like the overpaid high-schoolers should pack it in for the time being & go back to school...