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JC Penney is NOT a failed business, it's a struggling business, and one of it's biggest assets is very valuable real estate located in premier shopping malls across the country. They're simply borrowing against the value of their property while they attempt to get their business straightened out. Taking out a "home equity" loan, if you will.
JC Penney is NOT a failed business, it's a struggling business, and one of it's biggest assets is very valuable real estate located in premier shopping malls across the country. They're simply borrowing against the value of their property while they attempt to get their business straightened out. Taking out a "home equity" loan, if you will.
This thread made my brain hurt.
Way off. That is what I am criticizing.
Do you know what is meant be FIRE sector, and do you know the criticism that surrounds it? It does not seem so because you just tried to justify your statement by saying its just like all the other FIRE sector operations. Its like saying to me don't worry about that toilet being backed up because the other toilets are backed up.
To be sure JCP is a failed retailer according to the economic models I use, and its operation were implicitly from real estate leverage, meaning the hot dog stand near the entrance sells hot dogs because its near the entrance. Hence the business is nothing other than that of a rentier. Compliments to the chef do not go to a restaurant who draws all its traffic from the view only. Now JCP is explicitly leveraging its government created seed corn in real estate equity which means that funds flow to assets not to successful business models.
If one were to look at the Georgist weakness aka where it may become a dead weight tax:
George was right that other taxes may have stronger disincentives, but economists now recognize that the single land tax is not innocent, either. Site values are created, not intrinsic. Why else would land in Tokyo be worth so much more than land in Mississippi? A tax on the value of a site is really a tax on productive potential, which is a result of improvements to land in the area. Henry George’s proposed tax on one piece of land is, in effect, based on the improvements made to the neighboring land.
Since JCP is failing as a retailer it is not contributing to the prosperity given no space would sell for being near JCP hence the equity in the space is purely parasitic, and now it will be turning into a bank asset. In the Disney example Disney itself is the source of the prosperity.
Point in fact is we are printing money and giving it to known failures all because we have a legally created ground rent bought and sold because of demand for space.
This is but one derailed car in the train wreck of an economic model.
gwynedd1, I didn't read the articles' but I follow/agree with what you're implying. This is the Economy you get when you keep inflating the money supply to alleviate the DEBTORS! Try this: http://www.marketoracle.co.uk/Article40090.html
gwynedd1, I didn't read the articles' but I follow/agree with what you're implying. This is the Economy you get when you keep inflating the money supply to alleviate the DEBTORS! Try this: http://www.marketoracle.co.uk/Article40090.html
We are not alleviating debtors in general. Debtors with good credit are feasting, granted. I know because I am one of them. My debt overhead has been cut in half just on interest, let alone the rapidly declining principle. What we did do was alleviate the creditors. Their loans(wiz bang money creation) were total crap. They swapped trash for cash, aka fictitious mortgage bloat and were handed treasuries which is cash at the fundamental level. Half the national debt started out as wiz bang commercial credit while people ignorantly whine about "stimulus". Federal budget deficits( created by not taxing. This money system has public and private equity netting to zero. There is no positive equity measured in our money system when adding private + public equity. ) alleviates debtors, and those in no way were large enough to offset the speculative real estate values created by none other than speculation that the bank credit would never end.
We are not just inflating the money supply. The money supply grows from existing equity from assets, often just legalized monopolies. If the government decides to give a company a legal parking lot monopoly, bang commercial bank credit comes flooding in up to the level of legislatively created equity. The aggregate rise in prosperity in that scenario is less than nothing.
So all the passively created prosperity is being sucked out into the Financial sector? Why do you think they have mansions on the East coast, drive super cars and hire thousand dollar per hour prostitutes while making nothing? Cause we love debtors?
"legislatively created equity" drawing loans and interest payments.Think about what that means.
Once again, a nonsensical post. JCP's real estate holdings are what has value. That's why they can borrow against them while they try and sort out a business model that works.
GS and JP are trying to buy real estate at no cost with tax payer dollars.
Loan against an asset. the loan fails. the bank gets the asset.
Now the bank should be able to tell the loan will fail because i can based not on the business model but on the macro economic picture. So the bank knows the loan is bad from the get go. When the loan goes bad the bank then says bail me out again because I'm too big to fail.
What if your grandpa owns a $500,000 home free and clear. Do you worry about his cash flow since he's retired?
If housing prices are way over inflated and ready for a correction then yes you do. If the economy is on the edge of a massive collapse then yes you do.
Why don't you ask Eddie Lampert, who piled into Sears so he could gut the real estate and sell off the retail biz for junk?
He now has real estate he can't sell, and a retail biz that stinks.
Pretty much the same problem exists at JCP, although if GS is involved, you know they smell blood in the water (i.e., they are pretty sure they will get the property for pennsies on the dollar through an expected default by the borrowers, JCP) and have already likely sold an option to someone to take the real estate off their hands. Goldman is sort of like that when it comes to making money.
You changed the subject. The title was FIRE sector. Why would I debate someone who takes a microeconomic approach to JCP when I titled it FIRE? That means the subject was GS and JP, Finance, the F in FIRE. They are financing a failed retailer because they have equity in their property which by my economic model is a value not their own(See georgism). There is no debate; its just irrelevant. When the other poster mentioned the FED, they were exactly on point.
So if you cannot make the basic macro vs micro context in economics I would not bother replying to any of my posts because you have no competence in subject matter. Its just babbling.
Sorry I promise to never post again in your threads full of babble.
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Please go google "Finance, Insurance,Real Estate based economy...
