1. Picture a complete freeze in lending, and a lack of access to cash. No one can buy cars or houses. People with no cash on hand couldn't buy anything. Stores can't stock shelves or pay employees. Forget just the banks, every company from GE to local mom and pop shops would be under within a month. Tens of millions would suddenly find themselves out of work. You'd have mass riots in every major city in the nation. If we were lucky, we would be living in a state of martial law.
This entire premise is based on the fact that new players will not enter the space that just appeared.
Riots? Martial Law? You have got to be kidding. This reeks of statist fear-mongering.
Not even the great depression brought on Martial Law.
Unfortunately the situation is very different now in some critical ways which could indeed lead to riots and martial law.
At that time the USA was still predominantly a rural and more self-sufficient society. My grandfather was walking around selling potatos during the Great Depression.
The Great Depression was
caused by the network effects from the First Industrial Revolution which created mass production factories in the Second Industrial Revolution. This bankrupted the cottage industry and socialism in Europe. Which caused 76% of the world's gold to flee to the USA.
World War 1, FDR's New Deal, and WW2 were able to keep the people busy and people could survive in the semi-rural ways too. The USA was a net creditor and had much strength in industrial undercapacity and huge resources to apply to the Second Industrial Age.
Whereas, the situation we have now is that all nations are bankrupt and have irrelevance to the Knowledge Age. Thus government has no clue how to solve this debt bomb.
The only thing the socialism knows how to do at this point is tax and spend.
There is no place for capital to run to. The economy is shifting to the Knowledge Age where capital is less important than specific knowledge and small world-changing focused opportunities.
So you are going to have a very confused and pissed off society as this accelerates 2016ish.
2. And as for your ridiculous solution, is this something you actually spent more than 2 seconds to think up? Honestly, how long do you think it would take for the government create this plan, to identify these people, and to mail them checks. A few months? A year?
As opposed to giving reward to the stupid and losers? Now that was ridiculous and down right evil.
And as for your time frame, there is this tech called a database that Dr Codd nailed for us in 1969.
As a real world example, the Australian government gave out $800 dollars to every tax payer directly into their bank account within 3 weeks. It's not hard.
It was a perfect Friedman helicopter drop. Minimal implementation cost and only a few dead people wasted it.
3. What money was spent? In the end, the banks paid the money back, so what money could have been "saved" for a better use?
The opportunity costs that the US lost by keeping the dead wood alive is immeasurable. You are currently experiencing a "long slow painful recovery" due to propping up zombie businesses.
Worse than that. Central banks have delayed
for decades the correction that should have come in the 1970s so that the boomers would have learned to be programmers as the personal computer was born. Instead the debt propped up all sorts of old world economy business that is no longer relevant. So now we will have an abrupt and very painful global adjustment that may even take us into a Dark Age.
I detailed this at the following post and downwards in the thread:
https://bitcointalk.org/index.php?topic=455141.msg5637503#msg5637503
