One Million Dollars.

December 2, 2008 8:17 PM

Given that at least $350 billion of Federal bailout money remains to be allocated by Congress to the Treasury, a hypothetical: what would happen if Congress decided that the problem with the credit markets was ultimately not a lack of money to lend, but a lack of credible lendees, and decided to just give every American a million dollars?

I'm pretty sure it would be something bad, but I'm just curious what that bad thing would be.

posted by Embryo to society & culture (18 comments total)

I think you mean give every American a thousand dollars.

The current argument is that something like what happened with the $600 stimulus checks would happen again. People would save the money and pay off debt instead of using it to stimulate the economy via overspending. Hence, it'd have a net result of decreasing the monetary supply instead of increasing it.
posted by saeculorum at 8:26 PM on December 2, 2008

Inflation
posted by All.star at 8:26 PM on December 2, 2008 [1 favorite]

Didn't Russell Crowe propose something similar to this on Jay Leno or David Letterman or something? As I recall, he also didn't do the maths right.
posted by robotot at 8:35 PM on December 2, 2008

Yep, thought so.
posted by robotot at 8:38 PM on December 2, 2008

Damn, stupid sausage fingers. Try this link instead.
posted by robotot at 8:40 PM on December 2, 2008

Also you realize the bailout money is basically meant to be recouped right?
posted by bitdamaged at 8:48 PM on December 2, 2008

Oh but all star has it right - huge inflation, a massive drop in the value of the dollar.
posted by bitdamaged at 8:49 PM on December 2, 2008

You realize the bailout money is basically meant to be recouped right?

If you mean "was sold as recoup-able in order to prevent a pitchforks-and-torches revolution", then my own answer is "Yup!"
posted by rokusan at 9:06 PM on December 2, 2008 [1 favorite]

Inflation

Whether the newly minted money is given to banks or individuals, the money supply is artificially increased either way. Everyone's dollars drop in value regardless of to whom the money is given.
posted by Blazecock Pileon at 9:06 PM on December 2, 2008 [1 favorite]

I'm not so sure about the inflation thing- deflation is the worry right now. Trillions of dollars have disappeared in the last few months, a few billion isn't going to even cover that loss. Deflation is the worry- look what's happening to commodity prices. Prices are falling, people don't buy because they believe things will be cheaper later, the economy implodes. A healthy economy needs a tiny bit of inflation to keep the pumps primed. As long as inflation is between zero and the gdp growth rate, everyone is getting richer.

Or, to answer the question with a question, how did that $200 billion bailout do for us earlier this year?
posted by gjc at 9:30 PM on December 2, 2008

Uh, inflation only happens if all your factories are running 'round the clock with no room for additional production. What happens in real life is goods go flying off shelves, factories maximize their production, which means more workers and more profits, who then buy more stuff, etc.

Inflation only happens in an economy with one moving part, which is what Ronald Reagan and Ross Perot stumped on, but not what we have here on Earth.
posted by Kid Charlemagne at 9:34 PM on December 2, 2008

Uh, inflation only happens if all your factories are running 'round the clock with no room for additional production. What happens in real life is goods go flying off shelves, factories maximize their production, which means more workers and more profits, who then buy more stuff, etc.

Inflation is the rise in price of goods and services. If, as the hypothetical states, everyone gets $1M dollars, it would have the effect of flooding the market with dollars and drive the price of goods up.

Whether the newly minted money is given to banks or individuals, the money supply is artificially increased either way. Everyone's dollars drop in value regardless of to whom the money is given.

This is only true if the money is "given away". I reiterate the earlier statement that the money is meant to be recouped.
posted by bitdamaged at 9:58 PM on December 2, 2008

This is only true if the money is "given away". I reiterate the earlier statement that the money is meant to be recouped.

That's an optimistic view, and one of many possible outcomes, a number of which end with the government permanently losing the taxpayers' money.
posted by Blazecock Pileon at 10:16 PM on December 2, 2008

Yeah, my math was end-of-workday awful, I guess 1,000 dollars to every taxpayer would be more in the realm of possibility. And I guess that question's not as provocative. I'm still interested to hear the takes on that option, though.
posted by Embryo at 10:24 PM on December 2, 2008

That's an optimistic view, and one of many possible outcomes, a number of which end with the government permanently losing the taxpayers' money.

Okay, I'm not going to argue that at this point, but that doesn't have a lot of bearing on the question. A loan to banking institutions has different effects on the economy then flooding the consumer market with dollars.
posted by bitdamaged at 10:31 PM on December 2, 2008

For many Americans who are deeply invested in this problem, $1000 to each American will delay their personal collapse by, oh, maybe half-a-house-payment.
posted by rokusan at 1:27 AM on December 3, 2008 [2 favorites]

People would save the money and pay off debt instead of using it to stimulate the economy via overspending.

That's exactly what I would do with $1000.
posted by desjardins at 9:03 AM on December 3, 2008

This is more or less what they did earlier this year. And - yeah - less than half was spent. So they're going to do it again in the New Year - but most of it will be spent on stuff like bridges.

The money for the bailout was to keep us in a financial system. Things would get pretty ugly without one of those.
posted by TrashyRambo at 6:41 PM on December 4, 2008