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I would agree with you that a recession is coming, except for the fact that the last one never ended.
I would say that it's more appropriate to say that our nation is simply declining. We are in a permanent recession.
Yes, you are correct. There has never been any real economic recovery. The Fed has been stalling, buying some time and using public money, future earnings in order to accomplish this. Nothing has been fixed because in order to fix our economy, to grow our economy again, we have to go thru deflation first. We have to destroy our bad debts.
Simple math, interest rates at 0%(hypothetically) for loans, banks give 0%(hypothetically) to investors. Investors don't like 0%, banks get less money to loan out.
And yet there is plenty of liquidity. Banks have all the money they desire to loan. No one walks away from a bank saying, "I qualified for a loan but they said they don't have the money to lend to me."
A famous economist once said "Nothing is either good or bad save the alternatives make it look that way."
While investors do not like 0% (or less!), investors understand the power of asset diversification, so they do indeed provide capital to banks. It isn't about the 0% -- it is about the alternative.
Many investors do like 0%, as loans if used for speculation are cheaper and less risky. Investors might like to invest in a business if that business can borrow at 0% for easier and less risky expansion and growth.
With current Fed policies, banks don't need your money to loan out. They have massive excess reserves.
First, thanks for the site. Second, I still don't agree with it. The use of debt as money is absurd. The fundamental thought was we have gold to back the money being printed and somebodies debt is an obligation to repay with using something of value, house or car, as collateral if they can't. The idea of using debt as money is crazy, so the more debt you have the richer you are. This is what most Americans believe. When we try to rationalize the type of thinking that all money can be made, it is wrong. On a global platform our currency is backed by gold because one nation isn't going to except debt as payment. If I understand it correctly that is why we are in hot water now. The regional needed to barrow from central, central needed to barrow from the Gov, the Gov needed to barrow from China. China isn't going to except debt as payment.
Investors don't like 0%, businesses like 0% and grow increasing their debt and increasing stock prices. Investors don't like high stock prices, they like low ones, buy when low, sell when high. Also, the business world rewards the riskiest growth so they will try to expand whether they can or not. This is why there is a new restaurant on the intersections of my city every month.
And yet there is plenty of liquidity. Banks have all the money they desire to loan. No one walks away from a bank saying, "I qualified for a loan but they said they don't have the money to lend to me."
A famous economist once said
While investors do not like 0% (or less!), investors understand the power of asset diversification, so they do indeed provide capital to banks. It isn't about the 0% -- it is about the alternative.
I like asset diversification too, but I don't know anyone to leave funds in something they know is going to tank or not make them money.
"Nothing is either good or bad save the alternatives make it look that way.", I wouldn't invest steam engines or rotary phones, they could become popular again make me a killing, but I just have a feeling they're not.
And yet there is plenty of liquidity. Banks have all the money they desire to loan. No one walks away from a bank saying, "I qualified for a loan but they said they don't have the money to lend to me."
A famous economist once said "Nothing is either good or bad save the alternatives make it look that way."
While investors do not like 0% (or less!), investors understand the power of asset diversification, so they do indeed provide capital to banks. It isn't about the 0% -- it is about the alternative.
Another thing, the FED can barrow money from the Gov. so in essence, it might not be their money. Kinda like the bail out. This is how I understand things to work, correct me if I'm wrong.
First, thanks for the site. Second, I still don't agree with it. The use of debt as money is absurd. The fundamental thought was we have gold to back the money being printed and somebodies debt is an obligation to repay with using something of value, house or car, as collateral if they can't. The idea of using debt as money is crazy, so the more debt you have the richer you are. This is what most Americans believe. When we try to rationalize the type of thinking that all money can be made, it is wrong. On a global platform our currency is backed by gold because one nation isn't going to except debt as payment. If I understand it correctly that is why we are in hot water now. The regional needed to barrow from central, central needed to barrow from the Gov, the Gov needed to barrow from China. China isn't going to except debt as payment.
Investors don't like 0%, businesses like 0% and grow increasing their debt and increasing stock prices. Investors don't like high stock prices, they like low ones, buy when low, sell when high. Also, the business world rewards the riskiest growth so they will try to expand whether they can or not. This is why there is a new restaurant on the intersections of my city every month.
Credit runs the world. Easy credit has the potential to run it on a higher burner.
The USD is not backed by gold anywhere or globally. China might own some our debt as Treasuries, or they might have USD. They are free to interchange and choose to their own desires. i.e. they get USD and only USD from the USA as interest and principle payments on any Treasury debt they hold. They get no gold from the US out of it.
Low interest rates tend to inflate assets like stocks. That creates more demand for stocks and tends to raise their price. Businesses love it because it makes it easier for them to grow and profit, so the stock in their business tends to rise. Investors love it!
Another thing, the FED can barrow money from the Gov. so in essence, it might not be their money. Kinda like the bail out. This is how I understand things to work, correct me if I'm wrong.
The Fed can create money out of thin air, so they have no need to borrow. In fact the Fed currently owns about $2.5T in US Treasuries, purchased with conjured USD. The Fed created money for much of the bailout.
Creating money out thin air, dose this not cause inflation? You pump too much "made money" into the system that has normal people's "earned money". https://en.wikipedia.org/wiki/Inflation
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