Monetary and Fiscal Policies

[ebacon]

Here is a chance for the GOP fans on the board to shine.

/fingers crossed

In the movie thread someone conclusory stated that "

. . . People wanting to destroy the Fed, stop government spending, end consumer credit....just do not get it. In third world countries this does not happen, and is why many simply cannot own their own homes or cars.

What might be some benefits of disassembling the Fed, reducing government spending, and/or reducing consumer credit?

[BlueStreak]

Good question. I've always wondered how eliminating the minimum wage and busting unions to drag down wages on the upper end of the bluecollar scale was supposed to build a strong economy.....................

Ummmmm, it's all those tens of millions of wage earners out there that buy the shit that Walmart sells, Folks......

I'm just sayin'

Regards,
Dave

[ebacon]

Interesting that you mention Wal-mart. If reducing consumer credit is bad, then why might Wal-Mart have brought back layaway?

That question is for the GOP fans.

http://www.youtube.com/watch?v=LzYp2X2Y4Xs

[ebacon]

Here is a discussion on layaway. They talk about the pros and cons from the consumer perspective, but what might be a benefit from a national economic policy perspective?

Again, the question is for the GOP fans.

http://youtu.be/qTq8ENjeUVY

[d-ray657]

I feel so left out.

I'm still gonna jump in and say that the return of layaway is excellent.

Regards,

D-Ray

[ebacon]

Originally Posted by d-ray657

I feel so left out.

I'm still gonna jump in and say that the return of layaway is excellent.

Regards,

D-Ray

That's fine. What is a reason that layaway might be excellent from a national monetary policy perspective?

[d-ray657]

Originally Posted by ebacon

That's fine. What is a reason that layaway might be excellent from a national monetary policy perspective?

Start from the premise that we need consumer spending to make the economy run. Note that the overuse of credit by far too many consumers has resulted in their near withdrawal from participation in the consumer market. This device gives the new breed of cash-strapped but credit-wary consumer a means to find some purchasing power for bigger ticket items. The result is a slight uptick in consumer spending. A side benefit is that it creates a bit of competition for the credit card companies.

These retailers would not be offering layaway unless it was good for business. Again, an increase in retail sales is good for the economy. For fans of the market-based economy this is a market solution to problems with consumer credit.

Regards,

D-Ray

[ebacon]

Ahhh. You parroted the talking points in the video.

I'm going to play devil's advocate against you.

OK GOP fans, D-Ray was a sheeple and regurgitated what might be considered a lobbyist version of the story. What is the elephant in the room that has not been discussed yet? From a 40,000 ft. executive view, what is the major benefit of layaway vs. consumer credit?

Beat him up guys. (Love ya, D-Ray )

[d-ray657]

Actually, those are things that I have been thinking since I first heard ads offering lay-away. Consumer debt was a huge portion of the economic crash. It reached a tipping point; when most of a consumer's income is going toward servicing debt, there is no room left for any other spending. The economic data since the crash was showing a big trend toward retirement of consumer debt. The market has responded by giving consumers an alternative means of purchasing power without incurring further debt.

I do have to confess, however, that the view from the executive suite is foreign to me.

Regards,

D-Ray

[ebacon]

10-4.

The big benefit in layaway lays in the area of sales forecasts and sustainability. Those are big words for what I call The Logic of the Farm.

The inherent problem with consumer credit, particularly high risk consumer credit, is that is hides the true state of the economy from the product planners and buyers in the front office. The more money they borrow to buy inventory then the more money they have exposed to risk.

By making the consumer buy first through layaway the front office has a faster feedback loop on true consumer purchasing power. It might not be more lucrative, but it is lower risk and more sustainable.

The reason I call it The Logic of the Farm is because everyone in the loop must sow seeds first before they harvest. High risk credit completely reverses that process and in that configuration it is inherently unstable.