Recessions, pandemic, unemployment and financial crisis they're all quite challenging scenarios with one thing in common, Money. But does throwing more money at a money problem actually work and is it a method that should be adopted?
I have a few differing views on the topic and there is no real right or wrong answer but rather right or wrong approaches and from where I sit in Australia over the past 13 years I've been able to witness two different approaches and thus far only one has really worked which was a focus on distributing funds to people.
I do however note that the second approach applied which provided financial support to businesses and utilise them as a distribution point for welfare hasn't had enough time to evaluate the full effects. There have been a large report on significant issues arising from its approach.
Bit of Background
In 2008 the Global Financial Crisis brought on by housing crisis in America in shape of inflationary bubble loans the effects were global. As debt bubbles burst due to unaffordable debt taken on by people and mass unemployment hit.
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In Australia then Prime Minister Kevin Rudd developed a plan to inject money directly into people's pockets in way of economic stimulus packages. It was highly debated in parliament and it was an approach not used anywhere else in the globe at the time. The primary focus was business bail outs to keep companies afloat.
In the end the policy passed at a reduced rate of $AUD950 per person with extras for families and other categories. I was sceptical but loves the $1900 combined my partner and I received it helped us pay the bills and buy a much needed couch, Aussie made of course.
Despite being highly controversial and people thinking that 25 million people were going to spend $950 on drugs and sex they didn't and it saved the country from recession as reported in the Australian Financial Review
This resulted in many more nations following Australia's lead and rolling out their own version providing financial relief to people.
Pandemic Relief
Fast forward to 2020 and the global Pandemic brought on by COVID and we have the conservative pro neo liberals at the helm led by current Prime Minister Scott Morrison whom were opposes of the original iteration of the stimulus package.
Their current iteration of stimulus was the complete opposite to what was done before and required businesses to apply and then receive payments to subsidies wages which would then be passed onto the workers. You can watch a quick video about it Here
Sounds great in theory but was already clunky and involved too many moving parts. What was supposed to be rort proof because businesses are honest and don't lie was a significant portion of incidents were businesses either applied and received the payment didn't pass it onto staff, charged administrative fees, only provided part payments, didn't even bother applying, applied for more then the amount of staff they actually had.
It also resulted in not being enough and state governments had to pick up the slack and provide stimulus to businesses. Costing each state billions of dollars.
In my opinion the entire operation was costly, slow and inadequate compared to just throwing $950 at everyone. Once you start putting in tiers, assessments, requirements all that increases costs for no good reason. Spending $10,000 to every dollar provided is costly and not worth it.
Yet still, people complained that money would be spent on drugs.
From the 2008 and 2020 crises it is easy to see that the best form of financial injection is directly to people. It's cheaper, effective and works well to support businesses. As we reside in a capitalist society in some times it is better to let the market decide and when they do wealth is evenly distributed and everyone does alot better.
What are your thoughts? Do you think a pro business or a pro person model should be adopted for future economic development and support.
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The problem with the stimulus has been that “not ordinary people” got the lion’s share of inflation.
Then, everyone is poorer even after getting tax rebate.
Ah see thats not good and yes inflation comes into play, need an effective tax system that sucks it back up and spits it back out so that it remains circulating in the community and pays itself off. Otherwise someone else will have to pay it back
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As we reside in a capitalist society in some times it is better to let the market decide and when they do wealth is evenly distributed and everyone does alot better.
it's impossible to have a capitalist system with central banking in place - (they fix the value of money, not the market)
We've been told that we live in a capitalist society - we live in socialist system.
I'm a little busy right now, so can;t type out along comment - however , if you look at the fundamental principles of capitalism and follow it through to it's logical conclusion - you'll see that we have, indeed, been lied to.
Pesky politicians! lol
Central banking is an impossibility with free market capitalism.
All countries , pretty much have central banks...ergo...we need some rapid re-education! ...enter bitcoin...
I'd argue that it's not socialist that is Neo Liberal. It was a better model when we use democratic socialism where the people decide on what's valuable VS what's not. Which is what is occurring with Bitcoin and cryptocurrancy. Wealth distribution is occurring in a democratic manner.
Central banks (in my opinion) went to far to the right. Because economics isn't something that you can study and say "this is the way". The market is fluid and ever evolving with people's needs, wants and desires changing. Because of the fluid motion not one model can be rolled out. Which is what people in power always try and do. Make everyone conform to "one model".
The only thing that should be a priority is equity in the shape of ensuring people aren't being taken advantage of ultimately ensuring corruption isn't occurring.
But these days a swipe of a pen can legalise corruption in a few moments.
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Central banks (in my opinion) went to far to the right.
This makes no sense.
A central bank - who issues currency and who decides it's value , is a centralized redistribution of wealth.
THAT, is socialism.
Window dressing is for the sell, it doesn't change the fundamental dynamics.
Capitalism isn't 'a model. (unlike man made socialism).
It's system that's found throughout nature - simply swap 'money' for 'calorie acquisition',and there you have it.
When we work with the system, we get prosperity.
When we work against the system - we get what we have now.
A hundred years in the making - of a totally corrupt shit show.
Central banks don't issue money, they develop policy and procedures and provide advice for legislation. Doesn't mean it has to be accepted. In Australia our central bank has been calling for the increase of wages to tackle interest rates and low money circulation but no ones doing it.
Capitalism isn't visible in nature. Attempting to find the similarities between calories and finance is a new one I must say.
If anything Feudalism is more visible in nature. Capitalism adds a dollar value to everything and depending on need/danger/experience it pays more. Nothing in nature is worth more the dangerous it is.
If I plant a potato in Australia, in US, in China, in Slovenia or anywhere it is still the same potato. Capitalism dictates it's price in other countries not nature.
Central banks don't issue money
...errrrr....errrrrr...I honestly don't know what to say. it's not often I'm at a loss for words, you know me...lol
...the first google that came up, ...(millions more).
Role of Central Bank in Issue of Currency
One of the most important role of Central bank is issuing currency.
https://accountlearning.com/role-of-central-bank-in-issue-of-currency-principles-types-of-issue/
Maybe go back to some really basic understanding of central banking and money, matey?
Mike Maloney's video's on the 'banking and money' are good starters.
...research Jekyll island if you want to know about the formation of the fed res.
research the Rothschild from 17th century onwards, if you want to understand how - and why- the central baking the system spread across Europe.
Enjoy !
Central branks do policy and provide loans when banks can't cover. They don't just print cash at the whim.
The "printing money" your suggesting is the current circulating supply and maintaining it. They're The regulator of banks. I am across what they're role is.
I'm not sure if it's different in the US but in Australia it can not do as it pleases without parliament signing it off.
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NOTHING has changed since the 18th century, in regards to the principles of banking.
Education is a wonderful thing!
Good luck ('red pill', incoming...)
I don't know but the news articles in response to the horrible jobless numbers was against the unemployment benefits. They believe that the large number in the employment and the large number of untaken jobs means that people are refusing to work. I don't blame them because some people are now earning more on unemployment compared to working their jobs before. There needs to be a balance and I fully expect this to lead to more automation and thus less jobs.
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If a businesses competition is unemployment benefits then there are bigger issues at play. Unemployment benefits are typically below the poverty line. The purpose of work is to not be in poverty.
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Yes but this is the US and you understand how inefficient our Congress is. This means the ones closest to the poverty line will earn more from unemployment than working right now.
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I'd rather they give ordinary people the money rather than to the banksters like was done in the '08 crisis. That was a terrible idea.
Yup, it appears people are better at managing their own money than the government
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Really depends on who's getting the money. People who needs to pay rents and food, or everybody else.
Also, who's going to pay those "money" back years down the road. Print money from thin year has its consequence. Imports will be more expensive due to inflation, well, except United States. When FED prints money, every country suffers.
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Which is why our current model of paying businesses was a bad idea. Things like this need to be planned and done properly.
You need to make sure it goes to the right place, who will pay it back? There is heaps of cash being thrown out the door for no reason which is always made to be paid back by workers. It's sad.
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That is a challenging subject with a few contributing factors. First thing is that we are predominantlt a capitalist world. If a business isn't generating an income then it shouldn't be in business because it's not meeting the need of the market. You can't generate an income by paying people less to try and stay a float.
However, if there are discrepancies where businesses are generating an income revenue but choosing to pay people poverty wages than they need to address their business model and pay people more.
Noting that economic and wages are different in the US and Australia. We don't have tips, I really get upset when I'm asked to provide one as we pay the wages through our purchases which are higher to cover. We've had instances of wage theft.
The purpose of employment is to not live in poverty, not all jobs will be paid equally but when the vast majority are paid at or below the poverty line people will be at a loss taking them because they now have an increase in costs associated to employment. Such as clothing, meals, transport, etc.
I believe some industries may need to be supported such as food I.e. farms because increases costs of food is often felt across an entire nation. But when we check corporate profits as in Australia the food sector is dominated by two major chains (supermarkets) We see they have increased profits in the billions per year but that profit isn't being passed onto farmers and farm hands but to stake holders and board members.
Capitalism is supposed to be a trickle down but we have a trickle up in some sectors. Needs re working.
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