The Vicious Cycle of TARP

[bascule]

According to the Daily Show, some of the TARP receipients (who received funds at 0% interest) are lending the money back to the government, to finance TARP, at interest.

 

Whaaaaaa?

[jryan]

That's not really the viscous cycle of TARP as much as it is the viscous cycle of all Government subsidy.

[Skye]

I don't think government subsidies are generally sold back to the government for profit.

[jryan]

And I think you are wrong. When the Government spends trillions in deficits and raises that money largely through bonds they can't help but have their bonds purchased in part through money gained through previous deficit spending that previous bonds are meant to cover.

 

The banks were given that money with the assumption that they would make money on tat money and become solvent again. That is what they are doing. This will always be the case until all debts are repaid.... unless you want to limit the banks to only investing is the stock market until all debts are repaid.... but if they were required to do that they would be in dire need of a bail out right now.

 

Finance is complicated and Jon Stewart isn't.

 

In short, it isn't the viscous cycle of TARP, it's the viscous cycle of deficit spending.

[Skye]

You've just outlined this specific case, rather than a general case. In general this isn't going to happen with all government subsidy. There may be situations, say the government subsidising agriculture then buying food for its military grown at a profit, where this churn occurs but in most cases the government isn't exposed to the private sphere to the extent its going to have much of an impact.

[jryan]

You've just outlined this specific case, rather than a general case. In general this isn't going to happen with all government subsidy. There may be situations, say the government subsidising agriculture then buying food for its military grown at a profit, where this churn occurs but in most cases the government isn't exposed to the private sphere to the extent its going to have much of an impact.

 

Yes, but the Government is dealing with the financial sector which deals heavily in Government bonds, especially in times of uncertainty in the stock market. There is nothing unexpected about this cycle.

 

As I said, if the Government handed out TARP on the grounds that the banks couldn't buy bonds then both the Government and the banks would be screwed in that deal.

[ParanoiA]

This seems to be an objection based on appearances. I would like to ask everyone to remember how that argument was received when it was used to disparage "spending our way out of debt".

 

Not to mention, many of us didn't agree with TARP anyway, so thanks for the opportunity to laugh at this mess.

[bascule]

Not to mention, many of us didn't agree with TARP anyway, so thanks for the opportunity to laugh at this mess.

 

I don't agree with TARP as implemented, but I do agree with the overall concept