Story Comments

The money will be welcome to have back. The problem is that some worthy services will be reduced or eliminated. I do expect a larger percentage of people that receive the checks will spend it. What they spend it on will most likely be on items needed and not on items that are just products of luxury.
I plan on paying down debt with we receive the checks. Maybe a dinner and a movie.
One thing that I see with the descrIption for what the money will be used for is one-sided from most fronts. If the rebate is saved it will add to liquidity. If debt is payed down, it will add to profitability of the lender. If it is spent on imported energy or products, out of the country it goes. It will not aid economic recovery, in my view.

That is the caveat of securitization. On one hand, the market becomes more efficient, but on the other hand, risks taken by one firm have an effect on every other firm in the market. In fact, this is one of the strongest arguments for increased regulation of financial institutions.

As for your comments on China, I'm not sure that I agree. To cut rates, the Fed increased the money supply, increasing the par values of existing bonds. The secondary market (and the bondholders) are negatively impacted, as yields fall. In other words, the Chinese bondholders suffer a double whammy. Inflation hurts their bonds, as well as their exports, as Chinese goods are pricier than prior to inflation, in terms of dollars.

-Bill-

If we force consumers to purchase items made in the United States at a higher cost, the total surplus in the economy drops. We (as consumers) lose more surplus in paying a higher price for goods than producers gain by receiving the higher prices (with the higher costs involved). This deadweight loss would be an inexcusable waste. Furthermore, anything that the government could do to push consumers towards buying American-made products would create an additional deadweight loss, most of which would likely be borne by the consumer.

On the upside, at least the weak dollar is reducing our trade deficit.

This is all moot, though, as the stimulus package has no provisions for pushing consumers towards 'made in USA' products. A rebate check to all eligible people would have a low transaction cost, and cause minimal market distortion.

-Bill-

Mr. Horan has made an interesting analysis.

However, one major aspect of this financial mistake is that it does not help American manufactures, but Communist China manufactures.

The 'free money' should be directed to apply only to specific products which are both manufactured/assembled in America and which have a North American product content of at least 50%. The Comerce Department would 'approve' the products based upon my criteria listed above and the products would be vehicles, appliances, furnaces and hot water tanks. Thus both American manufactures and consumers would benefit.

The prsent bill doesn't do anything to help American manufactures. Why is our Congress so uncarng about our manufacturing base and so willing to help Communist China? Without direction, as I described above, consumers will go to Wal-Mart and buy foreign products, which will help their economy, not ours.

The present 'free money' bill should be vetoed!

Not an especially balanced or news-worthy article. The last sentence makes it all clear. This 'certified financial analyst' is basing his conclusion on an n of 1. Not very scientific, and makes it pretty obvious that as 'head of private wealth' he'd be much more inclined to have permanent tax cuts for the wealthy (as well as a fiscally conservative Republican in the WH).

I would argue that the marginal propensity for consumption of this rebate check does not tell the whole story. In fact, I would be willing to bet that the people who are most likely to use it to pay down debt would also be the most likely people to spend themselves back to the same level. Because of this tendency towards dis-savings, the immediate effect of this may be a per capita consumption of $150 (0.25*600), but the long term consumption would likely be higher than the initial consumption.

-Bill-