The problem is that the banks don't want to lend money because they don't want to take on the risk of default since that risk is higher than normal in this economy, and the payoff (i.e. rates) so low. Fix the economy, and everything else will fall into place. And the only role the government can play in that is to remove the uncertainty, put a set of favorable rules firmly in place for the next 20 years, and then get their own financial house in order. Every dollar in deficit spending is a dollar of value that is stolen from the future of this country.
And the only role the government can play in that is to remove the uncertainty, put a set of favorable rules firmly in place for the next 20 years, and then get their own financial house in order.
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Very good post. I agree completely that’s what needs to be done but, barring a real economic calamity, one wonders if there’s sufficient political wisdom and will to do this. Taking away the “punch bowl” of government largesse is going to result in significant social unrest and political fallout. The necessary economic/structural adjustments may only be possible if we experience a significant recession/depression IMO (i.e., when we run out of other people’s money and there are no options left).
As a follow-up: Let's suppose that person A has $1000 under his mattress, and person B has $1000 in a “safe” bank savings account.
Now hyperinflation hits. Person A's mattress $1000 rapidly becomes worthless.
Historically, is person B that much better off? Will his bank keep raising deposit rates fast enough to at least dampen the hyperinflation effect? Or is person B ruined as well?