PeakTrader.com

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PeakTrader said...

The slow U-shaped economic recovery is a result of money being shifted around from federal, state, and local governments rather than a net tax cut. Also, TARP was paid back by consumers.

Small tax cuts by the federal government (e.g. $14 a week) spread out over two years were offset by higher state and local taxes, fees, fines, fares, tolls, etc.

A bold tax cut (e.g. $5,000 per worker) would've strengthened household balance sheets (e.g. paying-down high interest rate debt down first to increase monthly incomes), strengthened the banking system, and spurred demand.

A virtuous cycle of consumption-employment would've taken hold (where consumption generates employment and employment generates consumption) to raise tax revenues and lower unemployment and welfare payments.

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misterjosh said...

Or Peak Trader, maybe the government can stop messing around with our money and just let the recession pass. It seemed to work before the 30s.

Whenever some expert tries to meddle with the economy, there are inevitable unforeseen consequences.

I don't care how smart you are, you're not smarter than 300,000,000+ people all doing their own thing.

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morganovich said...

peak-

"Also, TARP was paid back by consumers."

perhaps you could explain that statement? last i heard, much of tarp was paid back by the borrowers.

it looks like taxpayers will only wind up on the hook for about 150 of the 700.

much of that went to freddy and fannie, who showered benefits on consumers for some time prior in the form of subsidized interest rates.

but even that has not been "repaid" by anyone. it's debt.

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PeakTrader said...

Misterjosh, before the 1930s, there were many more economic boom-bust cycles, which are inherently inefficient (since resources are utilized suboptimally both in the boom and bust phases).

The Fed prevented a deep depression from 1973-82 (although, there were four recessions, including two severe recessions), or prevented a period similar to 1929-38, and created a long economic boom from 1982-07 (with only two recessions, including one recession that was so mild it wasn't a recession based on annual real per capita GDP growth).

Without massive borrowing and creative accounting by federal and state governments, over the past few years, we would be in another deep depression, or in an even worse economic situation.

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PeakTrader said...

Morganovich, consumers-borrowers-households paid back TARP, i.e. the private sector.

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morganovich said...

peak-

if i loan you 100 and you pay it back, how does that retard the economy?

presumably you borrowed it for a reason.

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PeakTrader said...

Morganovich, the money was lent by the government to insolvent banks and consumers-borrowers-households paid the banks, which paid back the government.

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Rick Caird said...

We can also add the banks managed to pay back TARP out of earnings that were artificially increased by the Fed's ZIRP. That meant the elderly, savers, and owners of capital were forced to accept very low returns so the banks could earn more by paying nothing on deposits.

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morganovich said...

peak-

you reasoning doesn't make any sense.

you are also confusing illiquid with insolvent.

customers paid the banks no more than they did before. there was no "tarp" surcharge.

further, that's not how the banks repaid tarp at all. mostly, it was on investment income.

most of those getting tarp funds were illiquid, not insolvent. they just needed time to be able to free up cash in an orderly fashion.

that money came from the recovery of asset prices, not from consumers.

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PeakTrader said...

Big banks raising fees, savvy customers dodging them
March 26, 2011

The average overdraft fee hit an all-time high of $30.47 in 2010, and the typical ATM charge reached a record $2.33, according to Bankrate.com . ATM fees are expected to keep rising - banking giant Chase is testing fees of $5 in Illinois and $4 in Texas for customers of other banks who use Chase ATMs.

Meanwhile, free checking is slowly disappearing as banks impose more restrictions on no-fee accounts. Only 65 percent of banks offered free checking last year, down from 76 percent in 2009, according to Bankrate. And the average monthly fee for no-­interest checking accounts rose to $2.49 last year, a 40 percent increase.

TD Bank, now requires a $100 minimum balance for its basic checking account, and imposes a $15 fee if the depositor's balance falls below $100.

One big bank already has begun charging some customers for such things as transactions at teller windows.

Bank of America's "eBanking" account requires depositors to do virtually all their banking online or through ATMs. Receiving paper statements or talking to a teller triggers an $8.95 monthly fee.

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PeakTrader said...

Morganovich, banks suffered huge losses, and ultimately it's consumers-borrowers-households who make up those losses and more.

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