[Vision2020] rebate checks

[Ted Moffett]

All-

Given on this subject I am making "unqualified pronouncements," given I have
no professional qualifications in economics, no doubt there are mistakes in
what I write below:

http://www.iht.com/articles/2007/07/01/business/bxbond.php

>From URL above, an article discussing Bear Stearns woes from last year,
before the Fed. Reserve bail out:

Treasury securities made up 34 percent of funds overseeing $1.375 trillion
of bonds, compared with 29 percent for riskier assets like corporate debt
and emerging-market securities, according to a survey by Ried, Thunberg, a
research firm. The last time Treasury securities exceeded corporate and
sovereign debt was in May.

U.S. debt outperformed corporate and emerging-market bonds last month for
the first time in a year. Treasury securities fell 0.2 percent, compared
with 0.8 percent for corporate securities and 1.8 percent in debt of less
developed countries, indexes compiled by Merrill Lynch and JPMorgan Chase
show.
-----------------------
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml

>From URL above:

As the Wall Street Journal wrote this weekend, the entire country is facing
a "margin call". The US has come to depend on $800bn inflows of cheap
foreign capital each year to cover shopping bills. They may have to pay a
much stiffer rent.

As of June 2007, foreigners owned $6,007bn of long-term US debt. (Equal to
66pc of the entire US federal debt). The biggest holdings by country are, in
billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman
Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland
(140), Bermuda (133), Netherlands (123), Korea (118), Russia (109), Taiwan
(107), Canada (106), Brazil (103). Who is jumping ship?

---------------------------
The tax rebate checks, and the Fed. Reserve bail out of Bear Stearns, are
not totally paid for by US taxpayers, at least not at this time.  The
federal government is running on credit, billions borrowed from other
nations.  Tax revenue does not cover government spending.  In a sense, there
is no tax money left to give back as a rebate. The Federal Reserve Bear
Stearns bail out is supported by sale of treasury bonds, open to a world
market.  So in part the tax rebate checks, and the Bear Stearns bail
out, are sourced from the global financial markets, who invest in the US, by
loaning our government money, knowing this money supports the US economy,
which is essential to international economic well being, while the US
eventually pays interest on the loans.

"Hand outs" to the poor can help simulate the economy during an economic
turn down, given the money is spent on goods and services that support jobs
and production, even if it does encourage the poor to stay poor, or weakens
their competitive urges to "make it on their own," though there is ample
evidence that financial help to the poor can result in productive and
successful outcomes raising some out of poverty.

One of the biggest government "hand outs" is to the military industrial
sector, which routinely gouges the government with cost overruns and
wasteful business practices that are protected by the assumption that the
military hardware under production must be built, and thus the government
will continue to fund the projects, once a corporation wins the bid to
produce a given piece of military hardware, or provide services to the
military.  Consider the financial abuses of Halliburton, who won no bid
contracts under the Bush administration for services in the Iraq war.  Areas
in the US with military industrial sector jobs and production are in a sense
supported by hand outs, given the abuses of the use public money involved.
But just as in the case of direct hand outs to the poor, the money recycles
back into the economy, supporting economic activity.

Amazing how our financial system, in both the public and private sector,
runs on credit, backed by the assumption of future growth in wealth
generation.

Ted Moffett
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