The CV Care Act

[Manche757]

The Care Act will release large amounts of money to keep our economy from collapsing.  That is huge.  What does that mean to you and to me? Since this is an automotive crowd, I will alternate comments about  TCA with automotive ones for things you know with ones you might not know.

 

Some things you know:

The battery in your truck provides power to turn an electric motor that spins the alternator that provides power to spark plugs and turns the engine until it starts and runs on its own.

 

The Federal Reserve System protects our money supply, stabilizes the economy within parameters and regulates the banking system.

 

More things you know:

The battery in your truck stores 12 volt direct current and provides enough reserve to start a functioning engine before it runs out of power.  The starter on MJs draws about 1.5kw (kilowatts) at 12 volts.  That is roughly 12.5 amps.  If that motor ran on 120 volts that you have in your home, it would not need that fat cable and would easily run on a 15amp circuit you plug your lamps into and would take about the same amount of current that an electric iron uses. 20,000 to 25,000 volts are needed at the spark plugs to explode gas vapor in the cylinder.  The alternator converts DC current to AC current and the coil, which is a transformer, increases the voltage to what is needed.

 

There are two ways the government regulates to stabilize the economy.  One is Monetary Policy, which is the domain of the Federal Reserve System.  Fiscal Policy refers to raising or lowering taxes and is done by the congress and the president.  Most of what is in place today has developed over the last 90 years.  When the economy is perceived as “strong”, “expanding”, “bullish”, and etc. there tends to be inflation so the Fed will increase interest rates to slow down borrowing and spending.  Alternatively, income tax rates could be raised to slow down spending.  Practically both are used.  There are some inefficiencies in both. One in particular is it can take Congress a while to pass changes to tax rates and the boom or recession could have reversed on its own by the time the changes take effect. When you hear the Fed has changed interest rates, that is the rate they charge the most financially healthy banks.

 

And some more:

The alternator provides power to sustain the engine while running and to recharge the battery at the same time.  The battery is DC current and needs to receive a constant DC stream.  The alternator does that also. Diodes in the alternator create the steady DC stream and alternating current is not sent to the battery.

 

When the economy is shrinking in a mild way it is called a recession and when it is extreme, a depression is the results. As the economy cools off, the Fed will release more money into the economy.  While you might have a mortgage on your house or a promissory note on your car, truck or boat, the US Government  has treasury bonds, notes and bills.  Recently, the Fed chairman stated the Fed is buying back debts to increase the money they pay out to bond holders who will then have the money to spend. Many think Federal debt is bad but there are advantages. Individuals can buy Federal Reserve bonds, notes and bills. In financial circles those are considered to be zero risk

 

Where we are now and the intent to keep us there:

The economy is mostly strong but faced with a likely collapse if not headed off.  More is known now about how to accomplish that than 100 years ago.  Prior to the Great Depression that began in 1929, life was good.  Paper boys traded stocks. Prices kept going up and up and nearly everyone investing made money.  Stocks, which represent ownership in corporations, rose to prices that exceeded the worth of the companies.  The economy collapsed, which is what everyone wants to head off today. There was a 25% unemployment rate.  It might seem counterintuitive but banks, despite all the failures, had money to lend but businesses would not borrow because they did not have a steady stream of paying customers. 1933 was the bottom year of the depression. Businesses did not even replace equipment that wore out; there was net negative capital investment.  In 1933, the Securities and Exchange Commission came about to regulate first the issuance of new security offerings and the next year to regulate the sale and purchase of previously issued securities.

 

Imagine a circle; on the outer edge of the circle is the production frontier.  Business is good.  Mostly everyone has a job that wants one.  On average everyone has optimal goods and services.  During recession/depression, the economy operates deep inside the circle.  More are unemployed. Businesses have fewer paying customers. On average everyone has less.  That is why the huge payouts are coming.  In the 1930s, while FDR was president, no one knew how to solve the problem.  An English economists by the name of John Maynard Keynes convinced FDR to “prime the pump”, to spend money we did not have.  Public works projects were created to put people to work.  Public parks, roads, theaters and more were built.  The deficit spending was not enough to get us out of the depression though.  It took the massive deficit spending on WWII to get us out of the great depression. Today the economy has not collapsed and the great push is to get the money into the hands of spenders quickly to sustain businesses that in turn can pay employees that can spend to keep the system going.  The comments you hear about getting the money out fast is to prevent the collapse from happening; to keep the economy rolling right along.

 

For those that have not had enough:

MPC is the Marginal Propensity to Consume (often estimated at 80%) means that the average person will spend 80% of their income and save 20%

MPS is the Marginal Propensity to Save  (often estimated at 20%)

A formula exists that estimates that if one person spends $1, it creates $5 of economic activity.  A person spends a dollar at the store. The store pays its employees and suppliers so that they in turn pay others.

 

 

"Only thing we have to fear is fear itself"

From FDR's first inaugural address in 1933

Some rousing words in his own voice:

 http://historymatters.gmu.edu/d/5057/

[thecodemonk]

I...wow...that was really interesting and educational. That's cool!

Sent from my Pixel 4 using Tapatalk

[Manche757]

Mid-week, the IRS added some tools to their home page, irs.gov.   If you have not received a stimulus payment, you can click on the link below to check on the status of your payment.

 

https://www.irs.gov/coronavirus/economic-impact-payments

 

There are also instructions for those that have not been required to file returns and what, if anything, you need to do to get the stimulus payment.

 

If you are required to file returns but have been delinquent and not filed your 2018 return, you will need to file your 2019 return to get the payment.

 

If your direct deposit numbers are not known, you should get a paper check. Those should start going out on April 24, with people having the most need getting them first.  It could take months. 

 

Donald John Trump wants his name to appear on the check.  It will be the first time ever that a president’s name will appear on a Department of the Treasury check.  This may slow down getting the checks out.  Treasury has stated it will not but it will take extra man hours to accomplish this when the IRS has this huge task already.  Presidents are not authorized check signers so his signature will not be there.  Some have stated they will not cash the check so that they can keep it as a souvenir because his name is printed on it.

 

Still evolving:

 

 Stimulus payments will not be used to apply to taxes owed or to student loan payments. Back child support is an authorized offset of the stimulus payments.  At this point in time, there are no previsions in the bill to prevent bank accounts being garnished by debt collectors.  There has been some push back on that but both houses of congress are likely going to need to act to correct the oversight. 

 

For those that use automatic bill pay, if you income stream is uncertain you might consider stopping it to avoid overdrafts in your accounts that the stimulus payments are deposited in.

 

[Blue XJ]

I received our stimulus check earlier this week.   Really have no need for it, seeing as how we are both working.    But I figured what better way to be an American than to pick up one of these:

 

 

Just waiting for them to come back in stock at my dealer, apparently there are a ton of people purchasing firearms now.

[Manche757]

24 minutes ago, Blue XJ said:

I received our stimulus check earlier this week.   Really have no need for it, seeing as how we are both working.   

 

Consider donating it to some that do.  Or the CC