TARP Again
Congress is considering an $850 billion bail out package.[1] TARP (the Troubled Asset Relief Program) was only $700 billion during the Great Recession.
It makes sense considering that less than 50% of Americans have $400 saved for an emergency[2] and New York just had their unemployment site shut down after thousands of people flooded the website for benefits following their quarantine.[3]
Americans are so broke that even the casinos are looking for a bailout.[4]
However, TARP 2.0 won’t work because printing money does not fix a loss of productivity.
People can only consume as much as they produce and then trade. The other option is to go into debt and pay later.
Americans have already consumed $23 trillion more than we produce at the Federal level. We have to pay it off or print it away. Luckily for Americans who need a loan, the Fed is the lender of last resort.
“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.” -Former Federal Reserve Chairman Alan Greenspan, Meet the Press, August 7, 2011.
If the dollar loses too much purchasing power because of the debt and inflation, it could lose its reserve currency status because it is worth less than before so we could not import more than we produce anymore.
Consuming only as much as we produce would be a depression.
Hence the Fed prints and prints and the government spends and spends.
Too bad TARP did not work out for the middle class. They became the minority by 2015.[5]
End Note: As of this morning, the Dow, S&P 500, and Nasdaq were all down at or about 30% from their all time highs.