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Posted by joetaxpayer on March 12, 2007, 6:01 pm
Sgt.Sausage wrote:
>
> If Uncle Sugar had to print $100K to give to me under
> the FDIC, isn't that precisely because the $100K is gone
> from my account? Because it's disappeared?
>
> Wouldn't that be a zero sum -- my disappeared 100K replaced
> by a newly printed 100K. No net increase in money supply and
> no net increase in inflation.
Ok, let's take that to the next logical step.
If my house burns down, its value is destroyed, no? Instead of needing
insurance, why can't the government print the money needed to replace
the house? Same with my stolen or totaled car.
I think the only way this works is if there is a proven situation where
actual money is destroyed, not where it's squandered. That's why the
FDIC collects premia and has a limited amount it can protect.
JOE
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Posted by on March 13, 2007, 5:09 am
>
>
>
>
> > There is. It's called the United States Dollar. The Treasury can
> > print more money to meet its obligations. The problem would be the
> > risk of uncontrolled inflation that would result.
>
> I'm not so sure -- someone please help explain:
>
> If Uncle Sugar had to print $100K to give to me under
> the FDIC, isn't that precisely because the $100K is gone
> from my account? Because it's disappeared?
If, say, the management of the bank stole the $100k, it has gone
*somewhere*, albeit into the hands of local drug smugglers or real
estate speculators, say.
It is not 'destroyed'.
More generally, if the US treasury prints dollars, without issuing
bonds to back them up, then that money increases the money supply
(there is no reduction on someone else's balance sheet from buying the
bonds).
This would, in effect, increase the reserves of the banking system.
Through something called the 'reserve multiplier' a $1 increase in
banking reserves leads to a $12.50 (or more) increase in how much
money the banking system can lend.
>
> Wouldn't that be a zero sum -- my disappeared 100K replaced
> by a newly printed 100K. No net increase in money supply and
> no net increase in inflation.
>
> .
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Posted by Don on March 11, 2007, 5:07 pm
> What do people with even more money than we have do to protect their
> money in a bank. Not really fearful that the bank will go out as in the
> depression, but say someone has 20 times more than what the FDIC
> insures (more than we have too), do they have accounts at 20 different
> banks or what? Or do they even care with that amount?
One big safety measure that should not be overlooked is to be sure you own
your home free and clear at the time of retirement. Then, whatever happens,
you will not have to worry about making mortgage or rent payments. And
nobody will drive you out of your home, not even in an economic downturn
where lots of banks fail and/or stocks are worthless. Furthermore, if I had
enough cash to need 20 banks to get it all insured, I would put a big chunk
of it into more real estate, which again would not be affected by bank
failures or stock market crashes.
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Posted by Sgt.Sausage on March 12, 2007, 5:19 pm
> One big safety measure that should not be overlooked is to be sure you own
> your home free and clear at the time of retirement. Then, whatever
> happens, you will not have to worry about making mortgage or rent
> payments.
You've got that permanent rent payment to make the rest of your life
(barring some oddball "homesteading" exemptions) that we call Property Tax
or Real Estate tax.
> And nobody will drive you out of your home,
> not even in an economic downturn
Not so fast on that one. Our local auctions are filled
with homes where the owners simply couldn't keep up with the
tax obligations, and therefore they're watching their homes
go on the auction block.
Happens every day 'round here.
It's good advice -- pay off your home prior to retirement,
but that still doesn't make it a "sure thing". Them taxes
take plenty of elderly folks on a fixed-income right out
of the equation.
Think about this: We're now paying more (on average)
in property/real-estate taxes than our parents paid on
actual mortgage payments (we being my wife and I -- and
I'm sure that the rest of John Q. Public and family are
in the same boat). Assuming current trends hold, that means
that after 30 years of paying on your house, you'll likely
still have the equivalent of your original house payment due
on taxes. The good news is that, inflation adjusted, in
30 or 40 years that will amount to about diddley-squat, but
the bad news is if you're not growing above and beyond
inflation then that tax bite's gonna hurt. A lot.
.
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Posted by Elizabeth Richardson on March 12, 2007, 5:41 pm
>
>
> You've got that permanent rent payment to make the rest of your life
> (barring some oddball "homesteading" exemptions) that we call Property Tax
> or Real Estate tax.
>
I know of 2 states where that isn't so. In California, I believe, after age
65, you can defer property taxes until time of sale. Here in Alaska, the
first $150k of valuation is tax-free to those over 65. That may not sound
like a lot, but in most communities there aren't the high real estate
valuations of many other states. Though that won't entirely eliminate taxes
on many properties, it sure will reduce the heck out of them. Maybe there
are other states with similar provisions for older property owners.
Elizabeth Richardson
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