How do we rebuild the economy...

[Bigmack]

if we have HUGE interest payments on the bailout debt?

I always ask dumb questions on the economy forum because I majored in History, not Econ. You folks at least talk like you know what you are saying.

History - and some street experience - tells me that if you're paying large interest payments on a loan, it takes forever to dig your way out.

Or is the govt planning on paying interest at the current low rates?

Will investors continue to invest in US T-bills if the return rate is superlow?

Enlighten me, please.

[willing dwarf]

1. My hope is that we don't rebuild the present economy

which is built on an completely unsustainable model.

while we're kicked down so low,I would like to see a new approach built on the virtue and value of sustainable approaches.

Sorry, it's not a solution for you. Just an opinion that needs to be voiced!

[ananda]

2. The light is shining.

The solution is out there. We know how to heal
and repair the wounds as critical as they are.

They are as much wounds of the soul and the psyche
as they are of the world and things, though the
psyche's connections to things and the way we think
about them is critical to the solution..

as we all well know.

[Knight_errant]

3. Here is a solution...

..Government should stop paying interest on its loans, and default. Its that simple.

[Warpy]

4. People rushed into T-bills over the summer

in order to preserve assets, something that will probably be self defeating given the precarious nature of government finances. In the meantime, although their net worth numbers didn't take a big hit, their income did.

If you are going to use net worth to leverage debt, then it's necessary to keep those numbers high, and going to T-bills was a prudent move if they did it early enough.

However, if you're living on income from investments like I am, it was a wash between precarious investments, only the declining one producing income.

There will be a rush out of T-bills once the market is seen to have stabilized. I don't think the jubilation over Obama's appointment to Treasury is going to do it, although it was nice to see the numbers head north for a change. I still don't think we've seen the bottom and I still expect us to crash through that bottom before the market stabilizes.

In the meantime, it was a contest between asset preservation and income. With T-bills earning nothing, you couldn't do both.

[Tuesday Afternoon]

5. I am hoping that like a Phoenix, a new Economy arises from the

ashes of this one. I did not major in Economy. However, I do know how to balance my checkbook. ;)

[Warpy]

6. The economy we save will have to take a vastly different form

from the conservative run economy of the last 40 years. That's because conservatives all share a basic fallacy, that economies run from the top down. It's why conservatives always manage to crash the economy when they get into power too long.

I also approach it from history and I know we've been here before, many times, always with the same cause: the fallacy that the economy runs from the top down. It never has and never will.

Five years ago, the wealthy had the conceit that since they'd exported so many jobs, they no longer needed the little people. I heard ordinary people called "food gobblers" and heard the servants of wealth talk lovingly of culling the herd.

Now it turns out they actually needed us to buy the rubbish they produced at those offshored factories. It also turns out they expected people with no income to start paying the debt they incurred to buy all the rubbish. It's turning out they are going to be terribly disappointed on both accounts.

We will salvage the economy only by returning to an emphasis on the demand side of the economic equation. However, it will be a very different economy for all of us.

That's what history tells me, at any rate.

[lib2DaBone]

7. Let Bush and his Buddies Crash.. Rebuild from the ashes...

[lib2DaBone]

8. Rupert Murdoch has lost $60 Billion due to Bush Economy....

oh.. sooo sad.... too bad.....

[lelgt60]

9. Simple - you inflate your way out...

And pay pack the loan with dollars that aren't worth as much.

This actually kind of works in the short term if your "salary" actually goes up with inflation. YMMV. In the case of a nation, I think it's very similar.

Relative to the question about who will invest in T-bills: Right now the rate on T-bills is artificially low because people around the world think they are the safest investment there is. That makes for huge demand, which raises the price, which lowers the interest rate. At some point, when people are no longer afraid of other investments, this fear driven demand will go down, the prices of T-bills will drop, and thus their interest rates will go up.

The thing which makes this particular economic event interesting, is that virtually ALL countries are "printing" money, so, since it's all relative, the US dollar may not get as weak after the fear subsides as some might think.

But, what do I know...