@Ogion

"So, you're suggesting the government become a commercial bank. I suppose the government could actually do all kind of things to generate profits to funds government activities, but I can see politically it'd be toughsince banks don't want the competition. Look at the resistance the public option ran into"

yeah i know, but people hate taxes enough, if the gov't could stay honest and not use legal methods to become a monopoly power, then it would be SOMETHING... but you're right, it's a fairly dramatic appeal. I'm just looking at $20,000,000,000,000 in debt and thinking "that's a LOT of zeroes..."


"The other is scale. Profits from the entire banking sector run somewhere both of $100 billion dollars. The federal budget is $3.8 trillion. So even if you nationalized the entire banking sector and charged the same outrageous fees, you'd make up maybe 4% of the budget."

this is also true, though you could make in profit off of 100 million, about 4 million at 4% for loans. Then, destroy 4% of your QE money, and use that 4 million. Repeat the process, and then you're working off of 100 million dollars of non-inflation induced money

-- though in the meantime, there will be weird consequences for adding to QE and then capping, though it depends on the extent --

then with that 100 million, start adding profit, and slowly amass money to fund large social programs.


I'm not saying replace taxes, i'm just trying to be creative.

have social programs
lessen tax burden.

other than running things efficiently (an obvious method), how do we go about this? what angle can we approach it from?

@Ogion

I don't know, i DO know however that people hate taxes, but we need people's money, AND we keep on running deficits.

End of the day, high taxes and mediocre social programs will be a fix, i'm just trying to lessen the burden on the taxpayer.

@goldfinger already explained this idea away though, he's right in that it would destroy private banking

And to answer your question on paying down the debt it is pretty straightforward: raise taxes especially on the wealthy. See, Clinton, Bill.

@ogion

well, Bill took a LOT out of social security and governmental holdings, so total public debt INCREASED in his time in office. budget surplus, debt

https://www.treasurydirect.gov/NP/debt/current

type in the dates he was in office, total debt increased

so... this IS bipartisan though (EVERYONE hates it!!!)

the constitutionalist would argue that we shouldn't have any nationalized industries... although we wouldn't have any federal aid programs either.

I'm just trying to have my cake and eat it too.

is that too much to ask?

(literally IS too much to ask)

"though you could make in profit off of 100 million, about 4 million at 4% for loans."

Ha, even at 0% cost of funds you'd be lucky to make a million off $100 million in loans at 4%.

Also, I have been in the business of modeling sovereign debt. Debt levels don't really matter. What's matters is that you have enough to pay off the interest. So long as the interest payments as a percentage of GDP remain about the same, there's no downside to debt levels, from a safety perspective

Basically the issue is that people hate taxes and love spending, much of it stupid, and aren't very responsible. For example, look at how the people who most complain about the deficit always seem to vote for the party the consistently blows up the deficit. Since they clearly do NOT care about the deficit, obviously it is a smokescreen for something else. The number of Americans who care about the deficit genuinely are very very small

@gold

Wait, why would I struggle to make 1% off of 100 mil? Is it simply because of outside inflation?

Also, our interest is like 8% of our budgets and rates are damn low

@ogion

I voted democrat bro

Of course debt increased, but he got the budget on a sustainable basis and produced surpluses which the Repunlicans promptly blew up with massive and stupid tax cuts.

Maybe the US could go in for payday loans. The interest there is like 3,200%

And Goldfinger, you're a bank regulator? That's pretty cool! One can learn a lot from the university of webdip

@JamesYanik,
I just read your initial post here and I must admit that I am extremely confused by what you are proposing.

You are not talking about issuing bonds? Are you talking about Helicopter money? Can you clarify?

You could try nationalizing the oil industry too. They generate a couple hundred billion a year and we wouldn't then have to deal with oil industry propaganda anymore and could start shutting the whole thing down.

That's how places like Saudi Arabia and Venezuela go about funding the government

Thanks civwarbuff. It wasn't just me

I think the idea is to basically set up a lending instituiton using printed money and using the interest to fund the federal budget. So,
1) Feds print money
2) fed lends money to the public at fixed rate
3) profits from the lending go toward the budget
4) money is removed from circulation

Roughly

James, you're the rare person who is actively applying your brains and creativity to problems. Not all of them or even most of them will work, but successful people fail more, because they try more. That's what makes them successful

And just because old farts like me shoot them down doesn't mean that you're wrong

It's far from perfect, but the entire purpose of this thread should now be devoted to something besides banking, as @gold covered that.

Any other ways for gov't to increase revenue (fairly)?

@Ogion,

Well, that will show up in inflation.

Ogion I'm afraid I AM wrong with this one though. Keep on looking forward though...

@JamesYanik,

For the government to increase revenues, you must either increase economic growth, increase returns on government assets and/or increase tax levels.

Since printing money is such a problem, even with a maximum, and hurting private banking is a problem, let's address this in another way.


What if we used specialized government bonds -- there'd have to be some changes

series I, E and EE can be caused in whenever after 12 months, which isn't long enough for most loans. what if we create series X and series XX bonds? these bonds only can be cashed in after 15 and 30 years relatively: typical mortgage rates.

Now the series X and XX bonds, since they'd be less attractive than other bonds, would have to present a marginally higher rate. To pay this back, the government must have some overall increase in revenue.

Thus we'd need our own loans, but:
1. they'd have to be presented in such a way that wouldn't drastically hurt the banking industry
2. they'd have to yield higher returns to compensate for said Series X and XX bonds


First -- because it scares me less -- I'm going to address 2.

This simple matter is our loan rates would have to be greater than Series X and XX. Also, there'd have to be a provision where you cannot make loan 30 years +, you cannot make more 30 year loans than the number Series XX bonds that have been purchased, you cannot make more 15 year loans than the number of Series X bonds that have been purchased, and any loans between 15 and 30 or 0 and 15 years must be compensated for by at least one Series XX or Series X bond respectively.

-- sidebar: this could be bad, because if we don't loan out as much as we receive in bonds (between 0-15 and 15-30), then we'd be running on a deficit (or break even, or SLIGHT profit depending on the difference between the rates of our bonds vs loans). we'd probably have to have some quick adjustments for the disparity between the demand for bonds VS the demand for loans... we'd have to have quotas, where we'd place a ceiling below market demand so that we'd never give out more bonds than loans, causing this problem.


The more daunting 1.


We need to not hurt banking. Given that we'd need abnormally high rates in order to yield positive revenue, we wouldn't be very competitive compared to banks.

However, for this to all work, we need to offer a product that has a large enough base of demand; given that i'm virtually certain there'd be demand for long term higher interest Series X and XX bonds.

Also, if we want to make aggregate profit off of the loans and bonds combined to fund social programs, there must be a decent rate of return going on here. I don't want to do all this for 5 million $ + every year, or other marginally insignificant amounts.


So... let's turn around to Government bonds real quick.

The reason why people like government bonds is because they're a perfectly secure investment.

The reason why government bonds don't hurt the market, is because they're not the most competitive, and there's money to be made at higher risk levels.


AND... back to Government loans.

What could the government make an incentive for their loans, that the private market CANNOT offer?

Idea 1:

there are already fixed rate mortgages being competitively loaned out, so the government cannot cover risk for those, without hurting the market.

-- anything in this idea i'm missing? it looks like a dead end --


Idea 2: *if we were to necessitate the purchase of mortgage insurance* we could make loans for longer than 30 years; 50 or 60 perhaps. This is not a major market in banking, just as longer term, low interest, zero risk bonds don't have a real market outside of government.

I'm not sure what the demand for these would look like though, whether or not people would want them.

For starters, you'd probably NEVER actually own your home, so people would be turned off by that, although, your children would almost definitely inherit it.

Secondly, 60 years after 30 (or even 20!) would be WAY past average life expectancy, so the people providing mortgage insurance would not want to insure that, unless they had HIGH rates: and this would decrease demand, making our product even LESS sellable.

-- maybe some tweaking here? i'm not seeing a way to enter the market without directly crowding out private banking --



What could the government offer, that doesn't hurt banks? with bond they offer a more secure investment, but that's not in demand for loans.

Any ideas?

@JY - because there is a cost to doing business. Banks with larger balance sheets then that struggle to be profitable, period, on a 3.35% margin.

Unless you're just going to do away with all the safety and soundness measures built into the current banking system

Yeah. Who needs financial regulations and regulators anyway? What could possibly go wrong? I am sure that we can trust bankers to operate responsibly and legally without oversight since they're such great people. The best. I mean, they're practically saints. People say that the Pope is thinking of beatifying Jamie Dimon and Bernie Madoff for their great work for the poor. Seriously. They're the best!

@goldfinger

haha that confused me for a second; you replied to something WAY back up there.

in any case, IS there anything that the government could use as an incentive that would be relatable to security of bonds, except with loans? (and i don't in fact mean security, rather i mean a special incentive that only government is capable of providing)

(ok, that was a little to brainbomb for comfort)

@Ogion

*someone in distance* what about the subprime mortgage crisis?

HEY.

SHUT THE FUCK UP

this entire site

https://www.youtube.com/watch?v=WROJl6QtNMk