I did search on the net but explanations are more complex with more new words. So can someone please tell me what the hell this counter cyclical capital buffer is!
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Governments that issue their own currency, like the US federal government, have the ability to print and spend as much money as they want. Because of that, it’s possible to make laws that spending happen automatically under certain conditions, regardless of whether taxes can keep up with the spending at the time. That spending tends to increase when business does badly and decrease when business is doing well. That makes it counter-cyclic.
A great example of this would be a federal jobs guarantee. In that program, state and local governments would be required to give you a job if you wanted one, paying a set wage with healthcare, all paid for by the federal government. First, that would mean that business trying to hire you would need to pay more with similar or better healthcare. Second, when there’s a recession, people could quickly shift to improving their cities for a living wage and federal spending increases to do that. When business picks up again and corporations begin hiring, the federal spending associated with the program would decrease.
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