Why is America in debt and how can we fix it?

[Czcibor]

But more to my main point, it seems to me like people are getting distracted by the insolvency date into not dealing with the reality that it's a terrible program to begin with. As it stands today (if we assume a magically stable status quo even after 2033), SS will return people a sum roughly equal to what they paid into it. That's not just a bad deal, that's a disaster. People talked about how bad it was when they lost half their life savings in the 2000 stock market crash: this is both twice as deep* and unlike the crashes it is actually real and not just a temporary paper loss (if you include the preceding decade of gains, people came out ahead from the tech bubble, not behind).

Even worse, unlike the crash of 2000, this disaster happens bi-weekly. Every two weeks, you get a paycheck that has 12% taken out, with the "promise" that it acts like only 3% was taken out. The other 9% is effectively lost. For someone who makes $48,000 a year, that's $170 per paycheck that gets wasted. This lost 9% (9%!) has a crusing effect on our economy.

*The 75% loss is based on a reasonably returning retirement investment fund that should provide you back in retirement at least 4x what you put into it, after inflation.

I consider your statement here as a bit misleading. For example like assessing social security program in comparison to retirement investment through investment funds. Like claiming that a car don't fly well. (which is actually correct...)
-As far as I remember the program was intended as fully funded, then somewhere around the Great Depression, it was drained to provide some money to old people right away and turned into more flow through program. (good idea at that time? ;) )
-such programs are intended to have moderately redistributive function (if someone puts a lot into it, that's the point that he gets poor return on investment, the unfortunates are intended to have a very good one)

And the best part - nowadays there is not much choice. There are small assets, big liabilities and implicit assumption that system would be financed by next generations. The "good" program, presumably, except from redistributive function would invest something into stock exchange. But to get to such program you'd have to somehow pay this implicit debt (I don't know what are guesses for USA, for my country somewhere around 3 times annual GDP). From an extra tax? ;) Or maybe you'd start a 100 year plan to pay off such debt? You'd just spread the pain among generations through depressing investment return on social security contributions. If I would think about going to a "good" program that would be the only idea, that I would consider as not doomed... but you expressed your outrage at low returns.

 

[russ_watters]

From what I understand, you are correct, but it runs contrary to intuition. The only way to decrease what is paid into interest in the trust fund, is to decrease how many bonds the trust fund owns. To do this, SS must run a deficit. I think a lot of people are confusing this, because there is a natural intuition to tie what SS owes in future payments, to the trust fund, but they are not connected. Its better if the bonds are thought of as an accounting effort. If SS runs a surplus, the treasury owns more bonds, an interest paid on those bonds goes up. But this cannot effect the total debt because the same amount that the trust fund receives in bonds, is the same amount that the general fund gets in cash, so its a wash.

I think we're in agreement there (though later, you seem to contradict it...), so my point in that first part was - in response to your confusion as to why people would focus on Social Security - that the current trust fund's interest-only surplus and the national budget debt are in fact linked. When you combine them, the net is not a surplus, it is a deficit. That's why when you said:

I just don't understand why, in a conversation about how to reduce the debt, the the one area a lot of people are focusing on, is the one area of the covernment that is running a surplus at the moment...
[and]
I see the brakes squealing when it stops running a surplus...

...that implies the SS "surplus" it is helping close the budget deficit when in fact it is worsening the decifit. Because the "surplus" is below the interest rate, the "surplus" is increasing the net government debt.

So at the very worst, we're talking about exactly the same problem, but looking at fixing at least some of it from different sides.

Then:

But, that is not what this thread is about [privatizing SS], what this thread is about is way to lower the debt.

Since SS is today a part of the debt problem and will in the future become a much larger part of the debt problem, any discussion of any changes to SS for any reason are a relevant part of that discussion. Frankly, it is disturbing to me that people want to compartmentalize and ignore the SS issue for what seems to me like very weak reasons.

And, of course, once on the table, it is best to talk about what fixes would be best both for the debt and for the citizens' retirement well-being.

It seems like here that you are pushing for privatized SS accounts.

Just like trust fund vs general fund is a totally meaningless distinction, so too is "private" vs "public" for what to call the accounts. What matters is what happens in the accounts. IE:

Privatizing SS would have the opposite effect here that we are looking for, in that regard.

Whether any plan of any type would increase or decrease the debt depends entirely on the details of the plan. I would, of course, only support a plan that caused a long-term reduction in federal budget debt and increase in retirement savings ROI for Americans.

And that doesn't even count the extra $1 trillion to $2 trillion in transition costs required to set up such accounts.

http://www.bloomberg.com/bw/stories/2005-01-23/social-security

The rest of that paragraph:

Are private accounts really a good idea? The short answer is, they could be -- but only if Americans are willing to wait several generations for the higher returns to make up for Social Security's expected shortfall. The gap is so large -- $3.7 trillion in today's dollars -- that even if the stock market matched its historical average, private accounts wouldn't fill the gap for something like 90 to 100 years.

So that would be painful, right? So does that make private accounts a bad deal? No. What people need to recognize/accept is that we are already in pain and it is going to get much, much worse. Yes, there is going to be even more short term pain. Surgery hurts, but we need to remove the bullet to stop the problem from continuing to get worse and worse. We're going to have to make up those trillions in shortfalls one way or another and it would be better to do it with a program that can actually work instead of just making the problem worse and worse and worse until it consumes all of the money in the economy and destroys us all (at least those of us who are still alive when it collapses).

Remember: SS currently outlays $750 billion a year. If we lose 25% because we did nothing (the current plan), that's a loss of $187 billion a year (at today's outlay rate). That means the $1-$2 trillion transition cost is recovered in 5-10 years by fixing the program. Frankly, I don't see a 10 year transition period before pain turns to gain to be a huge hurdle.

Note also: those numbers are specific to Bush's program and would not necessarily be the same for other proposals. In particular, the percentage is only 1/3 of the 12%, up to $1000 per year. That's a tiny fraction of the money flowing into the program. Even a median income earner pays-in $6,000 per year, so that's only 1/6th of their current pay-in and less than 1/12th for someone at the max. In short, that's way too small of an effort.

The main problem with transitioning, is the same reason many people don't like it. It acts similarly to a pyramid scheme, in that it requires more people paying in, then there are collecting.

That's only during the transition itself and only insofar as the transition doesn't instantly fix that flaw. The way you say it, the transition creates the flaw, but no, the flaw is already there. By definition, a "transition" is the time it takes to eliminate the flaw: After the transition, that flaw in the program would go away. That would be the primary point of doing the transition - to eliminate the current pyramid-scheme structure. That's a good thing, not a bad thing. What you are suggesting sounds like saying you wouldn't get surgery because the pain won't go away instantly and it will hurt to pull the band-aid off the incision after it heals!

 

[russ_watters]

I consider your statement here as a bit misleading. For example like assessing social security program in comparison to retirement investment through investment funds. Like claiming that a car don't fly well. (which is actually correct...)

That's actually a great analogy, but for both I think you are viewing the issue to narrowly: why limit the discussion to driving characteristics when flying might be better? In other words, why does it matter that SS is functioning as originally intended if the way it was intended/functioning is bad? Why drive when you can fly?

-As far as I remember the program was intended as fully funded, then somewhere around the Great Depression, it was drained to provide some money to old people right away and turned into more flow through program. (good idea at that time? ;) )

SS was always intened as a flow-through program (a pyramid scheme). But regardless of when it happened, it happened and the economics have been getting progressively worse and worse over time as the pyramid has narrowed. It actually was a good deal for people who died 50 years ago: all pyramid schemes are good for early adopters and screw-over people coming later. The impossibly great returns for early adopters are a key selling point and helped FDR immensely in getting it passed. And hey, as long as the only people who suffer were their children, grandchildren and great-grandchildren, everyone relevant was happy.

-such programs are intended to have moderately redistributive function (if someone puts a lot into it, that's the point that he gets poor return on investment, the unfortunates are intended to have a very good one)

Re-distributive effects (not to mention funding other currently included programs) would certainly still be included in any replacement program.

And the best part - nowadays there is not much choice.

On the contrary: right now, there are only two choices:
1. Do nothing and the benefits get cut by 25% in the early 2030s (it is required by law that the program not be in debt, so the benefits will adjust automatically).
2. Do something to fix it.

Keeping the status quo of the program simply is not an option. Just like that crashing plane, you can't keep riding it after it hits the ground. The situation will change one way or the other.

The "good" program, presumably, except from redistributive function would invest something into stock exchange. But to get to such program you'd have to somehow pay this implicit debt (I don't know what are guesses for USA, for my country somewhere around 3 times annual GDP). From an extra tax? ;) Or maybe you'd start a 100 year plan to pay off such debt? You'd just spread the pain among generations through depressing investment return on social security contributions. If I would think about going to a "good" program that would be the only idea, that I would consider as not doomed... but you expressed your outrage at low returns.

Yes, that is what I'd like to see happen. And yes, that would mean - like a heavily loaded mutual fund - the returns would be limited until the program phases-itself out (essentially, when everyone currently paying-into it is dead, in about 80 years). But at least the program as a whole, would switch from a negative return "investment" to a high return "investment", instantly -- even if I only got to keep part of that return.

Let me say that another way: pretty much any such plan change would provide a benefit to everyone, vs the status quo, which is currently guaranteed to get even 25% worse than it is today.

 

[Czcibor]

SS was always intened as a flow-through program (a pyramid scheme). But regardless of when it happened, it happened and the economics have been getting progressively worse and worse over time as the pyramid has narrowed. It actually was a good deal for people who died 50 years ago: all pyramid schemes are good for early adopters and screw-over people coming later. The impossibly great returns for early adopters are a key selling point and helped FDR immensely in getting it passed. And hey, as long as the only people who suffer were their children, grandchildren and great-grandchildren, everyone relevant was happy.

I'd rather see it in line of system that

Re-distributive effects (not to mention funding other currently included programs) would certainly still be included in any replacement program.

OK, but if you cut a chunk to finance ex. spouse benefit, then the return from the remaining part would have problems to match any portfolio which started uncut.

On the contrary: right now, there are only two choices:
1. Do nothing and the benefits get cut by 25% in the early 2030s (it is required by law that the program not be in debt, so the benefits will adjust automatically).
2. Do something to fix it.

Keeping the status quo of the program simply is not an option. Just like that crashing plane, you can't keep riding it after it hits the ground. The situation will change one way or the other.

Yes, that is what I'd like to see happen. And yes, that would mean - like a heavily loaded mutual fund - the returns would be limited until the program phases-itself out (essentially, when everyone currently paying-into it is dead, in about 80 years). But at least the program as a whole, would switch from a negative return "investment" to a high return "investment", instantly -- even if I only got to keep part of that return.

Let me say that another way: pretty much any such plan change would provide a benefit to everyone, vs the status quo, which is currently guaranteed to get even 25% worse than it is today.

I do not get you.

If I was asked to phase out such program, I'd guess that it would mean ex. benefits cut of 33% right now (guess number, insert any ultra painful slash, much bigger than 25% you mentioned). Then indeed the program would not only finance itself but give a chance to pay back whole pyramid. But your idea involves creating a sovereign wealth fund?

Benefit to everyone? Not specially. You can either:
a) make a big slashing right now (which would s**** contemporary retires and those who would retire soon)
b) do nothing and s**** those retiring around 2030 or at that time drastically raise taxes thus s**** those being taxpayers at that time
c) spread the moderate pain all over a few generations to have this system more or less balanced (more or less reasonable idea, but you'd have to fight fierce resistance of baby boomers, who can try to delay any painful reforms until they are dead)
d) spread high pain all over a few generations to have the system paid back around ex. 2100. Sounds good, but it would benefit everyone... born in next century... hopefully... if such reforms are not reversed somewhere on the way by a wave of populism in ex. 2050

 

[JonDE]

I think we're in agreement there (though later, you seem to contradict it...), so my point in that first part was - in response to your confusion as to why people would focus on Social Security - that the current trust fund's interest-only surplus and the national budget debt are in fact linked. When you combine them, the net is not a surplus, it is a deficit. That's why when you said:

...that implies the SS "surplus" it is helping close the budget deficit when in fact it is worsening the decifit. Because the "surplus" is below the interest rate, the "surplus" is increasing the net government debt.

No this is wrong because the total debt of the country would be exactly the same whether or not SS had ever been created. Instead of that debt being paid to SS in the form of securities, it would have been borrowed from the public, with at least the same amount of interest, if not higher. The only way I can really explain this is to think of SS as a separate entity completely. In this scenario the federal government (without SS) has run a cumulative debt of almost 18 trillion. This federal government then found a great buyer for its debt in the name of the bank of SS, who agreed to buy 2.7 trillion worth of its debt. Either way, the federal government is paying interest on nearly 18 trillion, whether it is paying it to SS or to the public doesn't really matter. The only difference is, that SS is a guaranteed buyer, which should push interest rates lower, decreasing the federal debt.

Then:

Since SS is today a part of the debt problem and will in the future become a much larger part of the debt problem, any discussion of any changes to SS for any reason are a relevant part of that discussion. Frankly, it is disturbing to me that people want to compartmentalize and ignore the SS issue for what seems to me like very weak reasons.

And, of course, once on the table, it is best to talk about what fixes would be best both for the debt and for the citizens' retirement well-being.

Just like trust fund vs general fund is a totally meaningless distinction, so too is "private" vs "public" for what to call the accounts. What matters is what happens in the accounts. IE:

Whether any plan of any type would increase or decrease the debt depends entirely on the details of the plan. I would, of course, only support a plan that caused a long-term reduction in federal budget debt and increase in retirement savings ROI for Americans.

The rest of that paragraph:

So that would be painful, right? So does that make private accounts a bad deal? No. What people need to recognize/accept is that we are already in pain and it is going to get much, much worse. Yes, there is going to be even more short term pain. Surgery hurts, but we need to remove the bullet to stop the problem from continuing to get worse and worse. We're going to have to make up those trillions in shortfalls one way or another and it would be better to do it with a program that can actually work instead of just making the problem worse and worse and worse until it consumes all of the money in the economy and destroys us all (at least those of us who are still alive when it collapses).

From more of the article

It also slashes the future growth of Social Security benefits to wipe out the shortfall -- relying on the accounts to make up what amounts to only a portion of the difference. Indeed, today's 20-year-olds would see their promised benefit cut nearly in half, leaving them a check equal to just 15% of their annual income when they retire.

So it will be debt neutral in 100 years, and in the meantime, everyone gets screwed, with the young people today getting only half of what they would otherwise get? Even with the problems SS has, its gap is only 25% which is not "nearly half".

Remember: SS currently outlays $750 billion a year. If we lose 25% because we did nothing (the current plan), that's a loss of $187 billion a year (at today's outlay rate). That means the $1-$2 trillion transition cost is recovered in 5-10 years by fixing the program. Frankly, I don't see a 10 year transition period before pain turns to gain to be a huge hurdle.

The numbers don't seem to be adding up. I think its partly because I misread the article originally. The shortfall is apparently 3.7 trillion, and the 1-2 trillion is the transition costs. That still doesn't explain the discrepancy though. Maybe because the article is 10 years old might explain part of it, so these numbers need to be adjusted for inflation. The author was saying 90-100 years not including transition costs, which is much different then the 5-10 years you are talking about.

 

[AgentSmith]

A sovereign government has more options: issue more money, and/or devalue the currency.

Both of those options are just ways to borrow money.
There is nothing arcane about the answer to the question. You live within your means. Some years a government may spend a little more, others a little less, than income.
Cases in point is Greece, and Puerto Rico.

 

[mheslep]

When a government (or a person) has a deficit, they have three ways to get out of it - increase revenues (i.e. taxes), decrease spending, or borrow to make up the difference. In recent years, the most politically acceptable of the three has been to borrow. This works until lenders no longer want to loan you any more money.

Or, inflate the currency which devalues the debt. Also destroys individual savings.

 

[PeterDonis]

Both of those options are just ways to borrow money.

In the sense that they take away purchasing power from present holders of money, and transfer it to someone else, yes, they are like borrowing money. But actual borrowing of money creates explicit debt which has to be paid back. Printing new money or devaluing the currency does not; the people whose purchasing power gets taken by these means have no way of getting it paid back.

 

[BWV]

It is not possible to pay off the US debt and trying to do so is folly. Just get the deficit comfortably below nominal GDP growth, preferable with small surpluses during good years.​

 

[Hornbein]

People like free money more than they dislike devaluation of the currency.

Money is created by the government going into debt. It isn't practical to pay off the debt completely. Andrew Jackson's administration did it. It caused a financial crisis because there wasn't enough money.

North Korea is the only country with almost no national debt.

BUT 20 trillion in debt does seem excessive. What are they going to do if interest rates go back up to 10%?

 

[William White]

BUT 20 trillion in debt does seem excessive. What are they going to do if interest rates go back up to 10%?

if you owe a million you are in trouble, if you owe a trillion your creditors are in trouble

 

[mheslep]

if you owe a million you are in trouble, if you owe a trillion your creditors are in trouble

In the case of national debt "you" and the "creditors" are largely the same thing.

 

[William White]

In the case of national debt "you" and the "creditors" are largely the same thing.

ah, that depends on who "you" are.

who is really going to call in the USA's debt...? nobody... storm in a teacup.

its only money. there was a time when there was no money. today there is more money than 100 years ago. Its ponzi.

 

[mheslep]

See Greece. Nobody calls national debt. What happens is that the payments on the debt grow so large they eat tax revenues and government borrowing crowds out credit to private enterprise that slows the music. Suddenly citizens find their pensions cut off, the government employees are laid off. The government's only resort is to go beg for more loans to keep the music playing, and then the loans come under stringent conditions.

 

[Hornbein]

Alexander Hamilton thought it very important that the government be in debt. The creditors would support the system, thus stabilizing the government.

The US govt is the ultimate too-big-to-fail.

 

[WWGD]

David Vine argues US has way too-many overseas bases and there is no serious cost-benefits analysis on these bases, most of which he argues could close causing little if any harm to preparedness. He claims that $200 billion is a conservative estimate for the cost of keeping a total of around 800 overseas bases open. May not fully solve the problem, but $200 billion/year is a nice chunk of change.

http://www.davidvine.net/base-nation.html

 

[Vanadium 50]

He claims that $200 billion is a conservative estimate for the cost of keeping a total of around 800 overseas bases open

Then he's an idiot. That's greater than the entire Navy and Marine Corps budget. That's greater than the Air Force budget. It's almost equal to the Army budget. There is no way that this costs what he says. I do agree with him on one point - "there is no serious cost-benefits analysis on these bases." Including his.

 

[Hornbein]

who is really going to call in the USA's debt...? nobody... storm in a teacup.

The gov't is continually paying off bonds as they mature. It sells new bonds to pay off the maturing bonds.

The US gov't can't sell all the bonds it needs to at an interest rate that it thinks it can afford. So the Federal Reserve pretends to buy 900 billion US bonds a year, with imaginary money. It's call "quantitative easing." It used to be called "printing money."

 

[russ_watters]

He claims that $200 billion is a conservative estimate for the cost of keeping a total of around 800 overseas bases open.

Then he's an idiot. That's greater than the entire Navy and Marine Corps budget. That's greater than the Air Force budget. It's almost equal to the Army budget. There is no way that this costs what he says.

Since a good fraction of those "bases" are several hundred embassies and consulates, with a small handful of USMC guards, maybe he's including most of the State Department budget ($57b) in that estimate?

A lot of the others are probably one or two mid-level officers hanging around foreign cities and allied bases, acting as liaisons.

 

[PeterDonis]

David Vine argues US has way too-many overseas bases and there is no serious cost-benefits analysis on these bases, most of which he argues could close causing little if any harm to preparedness.

It's easy to say that when there's nothing going on in those parts of the world. But if there is, those bases suddenly become very valuable, and not having them certainly does harm preparedness.

The problem with trying to do cost-benefit analysis on the military is that you pay the costs every year, but you only get the benefits if there's a war.

 

[mheslep]

a conservative estimate for the cost of keeping a total of around 800 overseas bases open.

Those who would use these large figures are playing loose with the definition of "base" by including the like of a single 12'x12' room leased by the US DoD in Canada (http://www.acq.osd.mil/ie/download/bsr/bsr2010baseline.pdf , or ~60'x60' of space in Aruba.

 

[phyzguy]

I think it's interesting to look at the debt of the US and the UK over historical time. Paul Krugman is fond of pointing out that the UK has been continuously in debt since the 1600's, and is still there and prospering, so obviously it isn't a problem to be in debt per se. Also, the statement that is often made that debt just inexorably grows with time is just not true, at least when looked at as a percentage of the economy. I think the attached charts help keep it in perspective. The US was in greater debt after WW2 as a percentage of the economy than it is today, and the period after WW2 wasn't an economic disaster, in fact it was an economic boom that has been unmatched before or since. Countries are different from individuals. An individual has to eventually pay off debt, since an individual has a finite life. But there is no reason that a country can't be in debt indefinitely.

 

[WWGD]

Alexander Hamilton thought it very important that the government be in debt. The creditors would support the system, thus stabilizing the government.

The US govt is the ultimate too-big-to-fail.

It's easy to say that when there's nothing going on in those parts of the world. But if there is, those bases suddenly become very valuable, and not having them certainly does harm preparedness.

The problem with trying to do cost-benefit analysis on the military is that you pay the costs every year, but you only get the benefits if there's a war.

Why don't you read at least the argument offered for why this is not the case. You may not agree with it, but Vine argues otherwise, using research from the Rand Corp., not what you would call a bunch of peaceful hippies.

And then there is the fact that they do not exactly create good will towards the U.S. How about letting, say, Poland have a basis near Miami?

Still, I expected people to actually read the excerpts or cite references in disagreeing with my posts.

EDIT: Seems on the far left one cannot criticize the poor, and on the far right, one cannot criticize the military. Thought we were above that here in PF.

 

[WWGD]

Then he's an idiot. That's greater than the entire Navy and Marine Corps budget. That's greater than the Air Force budget. It's almost equal to the Army budget. There is no way that this costs what he says. I do agree with him on one point - "there is no serious cost-benefits analysis on these bases." Including his.

So please give us the details on how these bases are funded, because there are many sources who state it even higher. Who knows, they maybe funded from the $1 trillion+ military budget.:

http://fpif.org/the_cost_of_the_global_us_military_presence/

https://www.laprogressive.com/defense-budget/

There are some who believe it is around $100 billion

http://www.forbes.com/sites/lorenth...lgium-sweden-or-switzerland-spend-on-defense/

 

[mheslep]

WWGD, you are confusing the cost of bases and the cost of the foreign deployment of US forces, to include hundreds of thousands of soldiers, airmen, marines, and seamen, and their equipment. Those links (1st and 3rd at least) do not claim the US "bases" themselves cost hundreds of billions. And the $1 trillion estimate for the US military budget, which includes a large share of healthcare and pensions, is high by ~$200B.

Edit: Of the current ~$814B/yr - 2014 spent on defense, $161B/yr in 2014 goes to veterans.

 

[PeterDonis]

US was in greater debt after WW2 as a percentage of the economy than it is today, and the period after WW2 wasn't an economic disaster

Your graph shows that, while the debt was greater after WW2 than it is now, it went down pretty fast in the post-WW2 period. That's not happening now.

there is no reason that a country can't be in debt indefinitely.

Yes, there is. The reason the US has not had to pay off its debt is that its debt is denominated in its own currency, dollars. That means the US can reduce the real value of its debt by printing more dollars, which it has been doing at a pretty impressive clip. But printing dollars doesn't create wealth, and it certainly doesn't give wealth back to the people who loaned it to the US in exchange for dollar-denominated debt. At some point, the people holding US dollar-denominated debt are going to realize that, and stop taking on that debt.

 

[PeterDonis]

Why don't you read at least the argument offered for why this is not the case.

As far as I can tell from the links given here, I would have to buy his book to do that.

 

[PeterDonis]

And then there is the fact that they do not exactly create good will towards the U.S.

They don't create good will, right up until the point where the people in those locations want US protection. Then the bases suddenly create a lot of goodwill. Nobody was complaining about US overseas bases when they wanted us to enter WW II. The complaint then was that we were too isolationist.

 

[Hornbein]

The reason the US has not had to pay off its debt is that its debt is denominated in its own currency, dollars.

All nations are in debt permanently. The debt creates the money supply. Andrew Jackson paid off the debt, and it was a fiasco. There weren't enough dollars. States and banks started to create their own money, and it was a mess.

The smallest debt is North Korea, which has a national debt of ten million dollars or so.

I'm curious how communist countries did it. Did they have banks at all?

 

[Hornbein]

All nations are in debt permanently. The debt creates the money supply. Andrew Jackson paid off the national debt, and it was a fiasco. There weren't enough dollars. States and banks started to create their own money, and it was a mess.

The smallest debt is North Korea, which has a national debt of ten million dollars or so.

I'm curious how communist countries did it. I would think that banks would be merely a place to keep your money safe. They didn't have mortgages because the state owned all housing. Did banks lend money at all? I would think not. Where can I get info about this?

In a truly communist country its not even clear that you would have money.