Why can't we use some of the existing $11 trillion to "stimulate" the economy and create jobs?

Money is only borrowed to keep the government operational. They don’t borrow, say, two billion, just to have two billion sitting around for a rainy day. The borrowed money is carefully calculated, and the Bureau of the Public Debt borrows only what is absolutely necessary to pay for governmental operations.
Hence, it’s not like there’s 11 trillion sitting around waiting to be spent. And that’s where the different strategies come into play on Capitol Hill. Some legislators prefer to spend only the money that is paid for by matching tax increases, tariff increases, or other monies. Others prefer to spend what they deem necessary, borrowing if necessary.
This particular bill will be directly paid for by loans and borrowing, but, if all goes well, the federal government will get most of the money back through the resell of toxic assets that will be purchased during the bailout for nominal sums.

Most of the 11 trillion has already been spent. That means we owe 11 trillion, and much of it to the Chinese and other foreign governements. Of course, since we owe them so much, we’ve got control of the situation. They can’t afford to foreclose on us. If we borrow more, we’ll be even better off.

The 800 billion is more borrowing. The government issues bonds, and people who want a secure return on investment buy them. This includes blue-haired ladies and the Chinese government. If you were fully invested in bonds all these years, you’d be looking real good about now. This is why we are advised to diversify our portfolios.

There is one thing I don’t understand. The government could just print more money, too, without having anything to back it. That sort of thing creates inflation, and it seems to me that that’s what’s needed at the moment.

A really good explanation as to why we can’t just print more money is offered here.

@lefteh: I know all that. In fact, that’s exactly my point. Deflation is bad because it kills spending. We want to increase spending, and achieve a mild level of inflations. Both of those things are, theoretically, the results of printing money. I still don’t understand why, under the current circumstances, it is a bad idea.

Printing money will do exactly what we want. It’ll create more demand for goods, which will cause employers to hire again. It’ll stop deflation. It’ll increase the value of the dollar compared to other currencies.

I’m sure there’s something I’m missing, but I have still not heard one good reason why we don’t take this approach at this time.

@daloon

You are correct that the $11 trillion has been spent. But when I spend money, it now belongs to someone else. That money isn’t gone, it just exchanged hands. If that money is still owed to people, it must be in circulation to be paid back, no?

We already have been experiencing massive inflation and now deflation. Remember when gas prices quadrupled, gold also quadrupled, and the dollar was down tremendously. Recently, we have been experiencing deflation. Spending is down, unemployment is up, and times are tough.

Here is a great video with Fed Chairman Ben Bernanke.

@chris6137: I’m not sure what you’re getting at with the 11 trillion. It is no longer possessed by the government. How could they spend it on the bailout?

$11 trillion dollars is alot of money hanging around in private hands. Maybe I’m naive, but that much money can do plenty for “job creation,” so why do we have to add to debt and have the government spend the money, which will eventually end up back to the top companies anyway. I don’t understand why the government has to inject more money than already exists.

Still confused about your point.

@chris6137 Say you have a mortgage of $100,000.00 (your debt). That means you borrowed the money, and immediately bought a house with it. The money ‘changed hands’. Yes, it still exists, but has gone on to someone else, and they have probably spent it, too. And so on. There is no way for you to tap into that money again. So, how would you use your debt to ‘stimulate’ the economy? You can’t do it.

Actually, the more I think about it, the better printing money sounds. It might not even cause inflation. Inflation occurs when too much money chases too few goods. Well, we’ve had what, 3 million folks laid off so far? Who knows how much production capacity is idle or mothballed. If we stimulate demand by giving folks free money, there is a huge amount of economic capacity to come back on line before inflation will start to occur.

It has always seemed to me that this recession/depression is due more to a crisis in confidence than anything else. At the beginning, all the stuff in the country was valued at a certain amount. Six months later, the same stuff is still there, but it is valued at 40% less. What the fuck?

Value is merely an idea, and it is based on trust and belief. The morgage folks screwed it up by lending to too many people who couldn’t pay it back, and it spread from there. If we had pumped money into the system, those folks could have had higher salaries, paid back their loans, and we could have avoided the crisis. That is, assuming we could get the money to companies who would raise salaries. That’s a big if. The other way we could have done it is by simply giving folks a $2000 or $3000 income tax cut per person. It would be a flat amount so it would benefit the lower income folks the most.

Even now we could do that, and perhaps people would have enough money to stave of loan foreclosures. It would also stimulate spending, which is really what we want. Right now, people are afraid, and when they are afraid, they hunker down and save for the disaster to come. This, of course, makes things worse, and actually creates the disaster. If people spent, demand would rise, employment would rise, productive capacity would rise, and we might get out of this situation without more harm.

Seriously—print money. It’s usually a bad thing to do, but under these circumstances, it could well be the perfect thing to do.

Printing money can’t be the solution. You MAY lessen the financial strain on a handful of households but the people who need help would be in a worse situation. If the 300 dollars they are living is suddenly worth ten percent less, they will be able to buy ten percent less necessities before they run out of money and be in a worse situation by far.

Then the inflation that was started by printing excess money doesn’t go away but keeps building since now everyone has to make ten percent more to make their bottom line. This leads to even more lay offs as companies try to make up that ten percent and even more households in a financial crises. Ultimately leading to a worse situation than we started with.

Your $300 are worth 10% more (or something) due to deflation. You don’t want to spend it, because if you hold onto it, it may become worth 15% more. No spending, no need for products, no work. If we increase the money supply, we can counter deflation with inflation (hopefully in an inflation-neutral way). This should give people more confidence, they spend more, factories need to make more product, they hire people to start up the mothballed plants, and the economy comes back.

In January, Obama should have announced that there would e no income taxes for one year. That would immediately put that money into the pockets of consumers who would hae spent it and stimulated the economy quickly. The Porkulus bill diverted themoney to pet political projects to help incumbents stay in office rather than improve the economy and takes years to spend,