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Old 02-16-2013, 09:16 PM
 
621 posts, read 549,473 times
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Quote:
Originally Posted by gwynedd1 View Post
Its a liquidity trap and we have been in one for 5 years.
Back in 2009 I had someone explain to me what a liquidity trap was and I said we are in one.
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Old 02-17-2013, 09:52 AM
 
17,752 posts, read 15,090,112 times
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Originally Posted by pie_row View Post
Back in 2009 I had someone explain to me what a liquidity trap was and I said we are in one.
I think we are in an era now that can best be described by 10% of the population going into the underclass where the other classes report prosperity because servants are so cheap these days.They are not cheap directly but they are cheap because it can be paid with stock and asset gains coming from wage stagnation. Take the money facade away and its simply that service classes work cheaper. For expats who retire it is often said how they can hire a maid and a cook cheaply as if this is a sign of universal prosperity.

So we are essentially blind because of this temporary banana republic recovery.

Most of my gains has been from lowering interest rates and asset inflation. Its as if I have been getting pay raises but it has nothing to do with my labor income.
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Old 02-17-2013, 01:56 PM
 
Location: Someplace Wonderful
5,170 posts, read 3,742,936 times
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Quote:
Originally Posted by gwynedd1 View Post
Most money is "borrowed" into existence. Coins are an exception. Its either Federal deficits or borrowing from banks(however when the Fed grows the money supply with purchases its phony debt because its kicked back to the Treasury). With lower employment labor cannot negotiate higher wages so business profits have created huge cash hoards. However without demand companies see no reason for capital spending. Its a liquidity trap and we have been in one for 5 years.

I don't think its deleveraging so much( which is only a few hundred billion in mortgages) but rather that to get to full employment it took 1 trillion a year in mortgage debt to do it, which is basically money pouring into the economy. Now its not here and mortgage debt is still deleveraging(paying it back). Lately other debt has been on the rise which is why the economy has "improved". However again, by debt. Trillion dollar deficits has stood in place to some extent to replace the massive mortgage debt, but it would take more like 2 trillion a year deficits, especially as the Fed keeps mopping up interest income and returning it to the Treasury.

FRB: G.19 Release-- Consumer Credit

If you see it turn negative for a few month a recession is assured , unless mortgage debt goes on a boom again which I very much doubt.

U.S. Mortgage Market 2000-2008: The Reason We're in Today's Economic Mess - Seeking Alpha

From 2000 to 2008 mortgage debt rose from $6.9 trillion to $14.6 trillion, an increase of 110%.

Think the economy did not become accustomed to a flow of funds that had that much debt creation along with college and consumer debt + war deficits?

Last year looks like it went down about 300 billion.

FRB: Mortgage Debt Outstanding, December 2012
Thanks. Appreciate it.
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Old 02-17-2013, 01:57 PM
 
Location: Someplace Wonderful
5,170 posts, read 3,742,936 times
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Quote:
Originally Posted by gwynedd1 View Post
California debt isn't monetized, and you would do well to know the difference. State budget shortfalls do not increase liquidity or add to the money supply. A state charted bank certainly could. Why is California in debt anyway? If they want to pay for it they can pay it with their own bank. Why pay an interest charge? If citizens are worried about over spending there are cheaper ways to stop the state from spending like voting no and changing tax policy designed to drive up real estate wealth while insulating them from taxes. The property tax freeze means home owners will always vote for amenities which drive up their home values while passing on the costs to everyone else.

The national debt is the money supply not California debt.

You are an optimist. Why do people think of a collapse? It could grind on for decades or centuries and just decay.
Thanks. I think I get it now, or at least have places to look for further clarification.
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