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| Why NOT Shrinking Credit In Recession = U R Screwed in forum [Market-Ticker]
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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Quote:Worse, history proves I'm right. In 1920-21 we had an extremely sharp deflationary recession. Rather than "prime the pump" The Fed (which existed at the time) raised interest rates, thereby constricting "C" and the government balanced the budget, thereby removing the excess "C" emission it was involved in.
What happened? The economy cleared the excess capacity and employment recovered within 18 months, with the posting of the largest y/o/y industrial production gain ever in the history of the nation. I'm quite sure that Bernanke and most of the bankers are aware of this mathematics. The problem bankers have with the 1920 scenario is that they don't get to collect all the assets and zero coupon debt (i.e. W), distribute humongous bonuses and run away to Panama to await starting the process all over again if they do it that way. It's probably time to start realizing that they aren't stupid and their actions are purposeful and intentional. Our government on the other hand....better start realizing the manner in which they've profited from this arrangement in the past comes to an end when the country itself implodes. I don't think that is something they understand....yet.
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/ "The only regulation that really works is failure."--Rick Santelli
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Mpilar
Posts: 5613
Incept: 2009-01-05
Nashville, TN
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Quote: I don't think that is something they understand....yet. Oh, I think they understand it, they just want to continue to plunder and be able to leave as soon as things fall apart.
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Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats. H. L. Mencken
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Steelhead23
Posts: 2043
Incept: 2008-09-09
Portland OR
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While I agree with your analysis, there is also a temporal component to such decisions (Keynesian deficit spending). That is, if there is an assumption of underutilized productive capacity, the spending brings that production on line, with effects on V. There are two big problems with the Keynesian solutions today: first the enormous debt overhang makes further debt-taking, very risky; and the "underutilized productive capacity" is not necessarily domestic production - much of it is in China and other parts of Asia. So, the Keynesians just end up doing the helicopter drop on unemployed Americans (extended unemployment insurance), while making the transnational corporations exploiting Asian labor, ever richer. I cannot imagine JMK supporting 30 years of deficit spending to enrich transnational corporations as a reasonable strategy.
But what is worse - the federal government spending most of a trillion bucks annually it does not have, or the Fed, issuing credit at the rate of several trillion annually on garbage collateral? I tend to think that the Fed's actions, including its enabling of federal budget deficits by buying government debt, is worse. If there had been not QE2, my guess is that the TNX yield would be north of 5% right now and the federal gov't would have been literally forced to reign in spending. Isn't the argument for an independent Fed that they would be the adults in the room?
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"Give me control of a nation's money and I care not who makes it's laws" —Mayer Amschel Bauer Rothschild Benjamin Bernanke
For-profit commercial banks are a menace and should be eradicated
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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Quote:Oh, I think they understand it, they just want to continue to plunder and be able to leave as soon as things fall apart. I considered this as well. The problem is that with the exception of a very few, our illustrious members of government aren't enriched nearly as much as the bankers and not enough to last them generations. This means at some point they have to consider job loss (due to lack of country) a serious threat, not to mention a serious threat to their children's future ability to carry on the personal enrichment scheme.
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/"The only regulation that really works is failure."--Rick Santelli
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Adrenaline_junky
Posts: 1869
Incept: 2007-09-14
Chicago
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Quote:Remember that GDP = (( M + C ) * V) Quote:And GDP = (( M + C ) / V), and must, Er, you write GDP = (( M + C ) * V) twice at the top, but then write GDP = (( M + C ) / V) at the bottom.
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"If Goldman Sachs is doing God's work, they must be referring to the cruel God of the Old Testament who brought forth plagues, floods, and pestilence." - Me
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Widgeon
Posts: 13481
Incept: 2007-08-30
Region formerly known as the United States
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Quote:I considered this as well. The problem is that with the exception of a very few, our illustrious members of government aren't enriched nearly as much as the bankers and not enough to last them generations. That's correct. However, essentially all of the rest believe that if they just play along there's a real shot at some truly obscene wealth. It is this small, but real, shot that helps keep them in line and enabling the system as well. In that sense, it's not in their interest, ever, to "do the right thing" because doing so removes their chances of the really big payoff - FOR SURE ... whereas playing along keeps them in the hunt until the day the rope gets boiled: which they really believe won't happen. |
Bagbalm
Posts: 4263
Incept: 2009-03-19
Just North of Detroit
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I believe that buying hundreds of thousands of rounds of ammunition and bullet 'resistant' booths shows they think they can rule by force in the end game.
Trouble is when you get down to the level of the goons they are counting on to keep them in power they won't be able to keep them paid to a level that will sustain their loyalty.
The quality of their 'law enforcement' is also far less than they think. They are bully boys in overwhelming force Tasing old ladies and beating up drunks. I know they have the appearance of being militarized - but I don't think they will stand to fire like a real military unit.
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Quads4444
Posts: 1637
Incept: 2007-11-09
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..."When you take a loan backed by collateral you are making liquid current wealth. In doing so you post as reserve something you hold as wealth. This is not inflationary for that reason -- you withdraw from the market the potential use of that wealth during the time the loan is outstanding by posting it as security."
Trying to understand this in real terms.
Assume ALL homeowners tap into their home equity. The loans shouldn't be inflationary because they are backed by collateral (the houses). Yet we know this would be highly inflationary. So what's going on?
The inflation is generated at the bank. In order to accomodate all these new loans the banks will have to raise capital (which they rarely do) or simply increase the leverage of their balance sheet. They may go from 20 times debt/equity to 40 times. Voila, there is your inflation.
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Mrbill
Posts: 7857
Incept: 2008-10-19
North Carolina
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Quote:Assume ALL homeowners tap into their home equity. The loans shouldn't be inflationary because they are backed by collateral (the houses). Yet we know this would be highly inflationary. So what's going on? If the maximum loan amount is what the bank's proceeds would be if they sold the house *today*, then it's not inflationary. But that means considering that houses sold quickly don't sell at the same price as the standard "appraisal", and there are transaction costs involved as well. And, that also means the house can't lose a cent of value and the person can't miss a single payment, or the outstanding balance would also go higher than the liquidation proceeds. Everything lent above that threshold is inflationary. And there was plenty of that happening during the housing bubble. |
Winstonsmith2009
Posts: 1060
Incept: 2009-08-05
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"'C' is consumption" "'C' = credit"
Maybe a big "C" for consumption and a little 'c' for credit to avoid confusion? Or "C" and "C'". I don't know what the convention is because I have little interest in an economic "science" that isn't.
And that's the real problem with the mainstream "experts" like Benanke, Geithner, Summers, Greenspan, Krugman, et al. Their crude 19th century economic model (but THEY certainly don't think it's crude) doesn't even include private debt (credit) and many other important factors in its calculations. So:
"These people therefore are not "wrong", they're either incompetent or intentionally screwing you."
They are wrong not because they are wholly incompetent or intentionally screwing us, unless religiously following a severely and _obviously_ flawed (based upon its track record) economic theory makes them wholly incompetent. They are wrong because the entire foundation of the economic model they worship (and "worship" IS the best word for it) is wholly inaccurate -GARBAGE!- that as a result can't even predict in advance huge economic instabilities and then goes on to produce economic "solutions" that are the WORST possible non-solutions that can be proven as such by GRADE SCHOOL math.
What we have here is a bunch of High Priests who truly believe (their egos, social status and Nobel Prizes depend upon that) in their garbage economic theories and stupid pols (redundant) who fawn over every piece of garbage advice these priests spew because it is what they WANT to hear.
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Widgeon
Posts: 13481
Incept: 2007-08-30
Region formerly known as the United States
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Quote:Trouble is when you get down to the level of the goons they are counting on to keep them in power they won't be able to keep them paid to a level that will sustain their loyalty. Also conveniently forgets that the "goons" live in houses in communities w/ families, etc. In such a scenario, the "goons" have no place to hide in a society like ours after they take their superhero costumes off at the end of the day. The "lever pullers" always believe their minions will do as they are told ... until the moment the minions change sides. Happens all the time in history. Just an observation. |
Mrbill
Posts: 7857
Incept: 2008-10-19
North Carolina
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I should add, if everyone uses saved equity in their house to sell their equity to the bank for a loan, then all that's really happened is that all bank's owners, or currency holders (if deposits are backing the loan), have just bought those houses.
You might notice the price of things go up, as the borrowers buy whatever they wanted.
But, if the loans were made prudently, below that liquidation value of the house, then the currency itself isn't any weaker and the price of other things less in demand should drop (like the houses that were sold/borrowed against).
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Ponzi_unit
Posts: 8116
Incept: 2007-09-05
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Jubilee the debt and enforce $1 capital say I.
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Taxpayers witnessed a crime and stayed around long enough to get charged with it.
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Peterm99
Posts: 4995
Incept: 2009-03-21
SoCal
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Ponzi-unit wrote..Jubilee the debt . . . If by "jubilee" you mean flat-out cancel or "forgive", I disagree. The reward for the imprudent/reckless (sometimes even criminal) actions of many debtors and the adverse effects on the prudent/cautious would exemplify moral hazard writ large.
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". . . the Constitution has died, the economy welters in irreversible decline, we have perpetual war, all power lies in the hands of the executive, the police are supreme, and a surveillance beyond Orwell’s imaginings falls into place." - Fred Reed
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Ponzi_unit
Posts: 8116
Incept: 2007-09-05
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Taxpayers witnessed a crime and stayed around long enough to get charged with it.
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Hiphopapotamus
Posts: 569
Incept: 2007-07-11
Burbank, CA
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What ever happened to NoThing?
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Grashopa
Posts: 2626
Incept: 2009-02-03
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I think its better put:
GDP is P * Q. P is the price you pay, Q is the things you buy. The government is screaming that GDP is falling because P is falling not Q. Falling prices are good not bad. So why is the government trying to push prices up? Which they are doing as you said through credit since prices paid is the amount of money and credit times the velocity which they can't control.
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Theft is evil
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Ponzi_unit
Posts: 8116
Incept: 2007-09-05
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Taxpayers witnessed a crime and stayed around long enough to get charged with it.
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Nelstomlinson
Posts: 124
Incept: 2011-12-21
Juneau Alaska
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Winstonsmith, the crude 19th century models are still as practically useful and sensible as ever. Marginal utility is real, and really useful. Sayes' law makes good sense still: production enables demand. Adam Smith's ideas from the 18th century still make very good sense. The 18th and 19th century economists and moral philosophers had some worthwhile insights.
If you want seriously, obviously flawed models, you need to look to the 20th century macro-economic and general equilibrium models. That's what the academic economists are generally going by, rather than the 20th century Keynesian cross.
There are two vital points for all 20th century models: they must be mathematically sophisticated, and they must support government intervention. The mathematical sophistication is necessary for getting tenure, and the support for government intervention is necessary for getting government grants. ``Practical utility'' and ``making sense'' are not necessary attributes for 20th century models.
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Crow
Posts: 193
Incept: 2008-02-25
Canada
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I've been saying for a while this has been intentional. You're either a debt slave OR if you had the intelligence to stay out of it you get to be on the hook for the 'mistakes' of others. Half the ****ing financial PHD's on the planet work in government, the banks and the NGO advising them, but no one saw this coming, yeah right.
As for Keynes, this isn't even his system we have now is it? Wasn't his whole theory based around various points of a normal economic cycle? So if its an agenda sticking keynes name all over it gives it some form of respectability. To claim incompetence is a stretch in my book, is anyone that bad at their job??
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When does Keanu get here?
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Yermawm
Posts: 213
Incept: 2009-04-20
SoCal
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If we don't watch our P and our Q with regard to M and C, the S is going to H the F
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"We can evade reality, but we cannot evade the consequences of evading reality." - Ayn Rand
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Quads4444
Posts: 1637
Incept: 2007-11-09
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..."Assume ALL homeowners tap into their home equity. The loans shouldn't be inflationary because they are backed by collateral (the houses). Yet we know this would be highly inflationary. So what's going on?
The inflation is generated at the bank. In order to accomodate all these new loans the banks will have to raise capital (which they rarely do) or simply increase the leverage of their balance sheet. They may go from 20 times debt/equity to 40 times. Voila, there is your inflation."
Rethinking this one more time. I believe that collateral backed loans can indeed be inflationary. The bank creates money out of thin air even on collateralized loans. When the bank makes a new loan it increases its assets (its loan portfolio) then it 'creates' an equal amount of the money by putting it into the borrower's checking account. Checking accounts are part of 'M', so it increasing the money supply.
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Genesis
Posts: 130798
Incept: 2007-06-26
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But "W" is debited by the same amount (the sequestered amount) which is the superset of "M".
Go back and read it again.
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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
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Uppity_peasant
Posts: 3121
Incept: 2009-06-26
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I've been pondering the Fed's mandate of "stable prices" & inflation, which is so often mentioned here.
I'm beginning to believe that inflation IS corruption. The more money you have floating around, the more greasy palms you can cross (the Bezzle). Look at Illinois, land of the Vig. I'm surprised they don't have a "breathing fee" yet.
The higher inflation is, the more money that can be stolen. I stumbled over the idea while thinking about all the money the various .gov agencies have to fling around
Where the f*** do they get all that swag, I thought to myself.
You have a lot harder stealing from a guy who makes $5 an hour versus someone who's making $35 an hour.
When the money floating around is easier to track, you have less corruption. An inflated monetary base almost GUARANTEES corruption.
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If it's true that "assault weapons" are "weapons of war" and don't belong on the streets of America, why do the police need them? Who are the police at war with?
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