My cousin Penin Diaz, a used car salesman, claims to have found the solution to stimulating the economy, ending the home foreclosure crisis and reducing unemployment (or at least the loss of income due to unemployment). I unfortunately owe him a favor for marrying my sister, so I agreed to publish the following interview with him:
RIGHT: Penin Diaz has a plan to end the recession. (CLICK TO ENLARGE)
Barb Weir: Penin, you are not an economist. What makes you think you have the solution to one of the great economic problems of our time?
Penin Diaz: Barb. do you know how many people I have helped to buy a car? Thousands. How many economists have done that? Economists have only helped the banks, investment firms and corporations. Economists advised the government to bail out the big companies with big loans, and before you know it, their profits were through the roof again.
Barb Weir: So what’s wrong with that? It worked, didn’t it?
Penin Diaz: Well, yes, but not for the little guy. A lot of us are still broke and jobless, and many of us lost our homes, as well. And don’t even talk about the cost of health insurance.
Barb Weir: But didn’t Congress pass Obama’s mortgage renegotiation plan and Obamacare?
Penin Diaz: Don’t make me laugh, Barb. Mortgage renegotiation was a joke. Hardly anyone could qualify and the lenders made more money by foreclosing and collecting on the insurance. A total failure. And Obamacare means that you’ll be able to get insurance if you can afford it. But who can afford it? I have a better solution.
Barb Weir: OK, Penin, let’s hear it.
Penin Diaz: Barb, I owe my success in selling cars to creative financing – letting people drive away without paying a penny until later (and the later the better). That’s really the secret. You can sell a lot of cars that way. In fact, you can sell a lot of anything that way.
Barb Weir: Penin, that’s nothing new, and it’s what got us into trouble in the first place. A lot of unscrupulous people sold a lot of houses to a lot of people who couldn’t afford the payments. What’s the point in accumulating a lot of debt that people can’t afford?
Penin Diaz: Hear me out, Barb. I understand the problem of default and foreclosure. Do you know how many times I had to take cars back from folks who couldn’t pay? But no one ever defaulted before the first payment, and sometimes that first payment didn’t happen for three or six months, or even a year. In the meantime, we made a sale, the bank made a loan and the customer had a car.
Barb Weir: So what’s your point?
Penin Diaz: All you have to do is extend the period between the purchase date and the first payment. That’s the period that is free from problems of any kind.
“All you have to do is extend the period between the purchase date and the first payment.”
Barb Weir: Extend it how long?
Penin Diaz: The longer the better, Barb. Ten years is good, fifty even better, and I don’t think one hundred or one thousand should be excluded. Haiti took almost 150 years to pay its debt and would probably be in better shape today if it had waited five hundred years.
Barb Weir: Why would the banks accept such an arrangement?
Penin Diaz: Do you understand banking, Barb? The banks make money from lending it. The more outstanding loans they have, the more money they make from the interest.
Barb Weir: But under your scheme they’re not collecting the interest for a very long time.
Penin Diaz: No problem, Barb. They just put it on the books as a receivable and lend it out again. It’s perfect.
Barb Weir: What’s the point, Penin? Sooner or later you have to repay the loans, and by then they could amount to billions or even trillions of dollars.
Penin Diaz: I’m not sure the loans can’t just be deferred indefinitely, but just in case you like economists, one of them, Paul Krugman, came up with a solution.
Barb Weir: What’s that?
Penin Diaz: A trillion-dollar coin.