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What does this have to do with bubbles? How does a loss of buying power from going from $18 to $8 going to cause a bubble or inflation? What is the argument? Loss of supply?
I am willing to look at a case to be made but I see no reason to consider cheap labor to be behind asset bubbles. Its simply a shift in price because of supply. East Asians have vastly increased the labor pool.
Money supplies on the other hand directly effect valuations and when they are unstable so are the valuations aka boom/bust, bubble/deflate cycles.
If you have a strong manufacturing base where US workers are paid a living wage the economy doesn’t need these economic bubbles. The very idea that the US can replace manufacturing jobs with service jobs is insane. Can you even give me an example of a service job that is a direct replacement for a manufacturing job?
If we are going to get out of this recession it seems like we need to create a new type of economic bubble. In the 1990s we had the Internet Bubble, then the stock market bubble, then the credit bubble, then the energy bubble, then the housing bubble. Each one created a boom and bust cycle that for a very short period of time created lots of money and wealth, then we crashed.
The end of every recession is always a new bubble.
What is the new bubble?
Infrastructure Spending Bubble
Clean Energy Bubble
Massive government spending Bubble?
Can we get out of the current economic recession without going back to a new bubble?
That’s all we need is another economic lie to which the next generation will have to suffer through. I agree bring back jobs to the U.S. and pay people a living wage.
How do you think the 50's economy didn't go back into the depression before the war. The housing and automobile bubbles is how. No governamnt spending is going to making any really last bubble because it just builds debt on a false demand.
We have a bubble monetary system. There is no way until it is addressed. As assets go up in value their ability to serve as collateral goes up. This allows it to be the bases of new money which causes inflation and assets go up in price. The same assets that serve as a monetary base as collateral are the same ones used as an inflation hedge and prices go up even more which becomes ever more collateral. Then the whole thing unwinds as deflation since inflation hedges are no longer desired and assets serve as dwindling collateral for any new loans. The cycle will continue. The housing market is just the epitome.
If you want out put you efforts behind ending the fractional reserve system that allows banks to inflate the money supply by promissory agreements and the collateral behind them.
This is true and I have come to the same conclusion. Having a debt-based monetary system that is expanded using a fractional reserve banking system that basically issues currency through loans is trouble when you use interest rates to control the business cycle. To keep on top of the compound debt that is created overtime, you have to keep increasing the money supply to prevent a depression/deflation. What is worse is when you should have your recession to wipe the debt out, we bail them out and keep those interest payments in place while at the same time the ability for people to pay any debt is being greatly reduced. The writing is on the wall and either your prepared or not, the math does not lie.
If you have a strong manufacturing base where US workers are paid a living wage the economy doesn’t need these economic bubbles. The very idea that the US can replace manufacturing jobs with service jobs is insane. Can you even give me an example of a service job that is a direct replacement for a manufacturing job?
Hi RedNC,
Again my Japan example shows that a strong manufacturing economy does not prevent bubbles. So does the 1920s in the US. Its an issue yes but not a bubble issue.
Now as to service verse manufacturing it all depends. I prefer services like tow trucks or transportation more than junk items like electric can openers and pocket fishermen. It really boils down to wealth and what is it? Good transportation that is cheaper and faster is wealth creation though it will not show up as manufacturing. I measure wealth in an efficient achievement of a goal.
This is true and I have come to the same conclusion. Having a debt-based monetary system that is expanded using a fractional reserve banking system that basically issues currency through loans is trouble when you use interest rates to control the business cycle. To keep on top of the compound debt that is created overtime, you have to keep increasing the money supply to prevent a depression/deflation. What is worse is when you should have your recession to wipe the debt out, we bail them out and keep those interest payments in place while at the same time the ability for people to pay any debt is being greatly reduced. The writing is on the wall and either your prepared or not, the math does not lie.
Hi BankREO,
What a difference it makes to clearly see the mechanics of a system of monetized debt. It is as if finally seeing for the first time that balancing budgets, paying debt etc is as futile as a snake swallowing its tail. Those that do not understand seem to be convinced they have seen snakes swallow prey of all kinds with no issue. However the tail is quite different and it begins quite the same but in the end there is no way.
Debt is money and money is debt. If we all pay down debt the money supply shrinks and the real debt remains the same. If money were sea shells and we tossed them in the ocean I believe most people would understand a depression will follow. However when money is simply created as bank debt and its paid down they do not see its being cast into the ocean. All the personal advice is to reduce debt which is collective suicide when we use debt as money. This is why in this absurd system that has been foisted upon us it is actually better to use public debt as money rather than personal debt. This can only be achieved by direct funds to tax payers and consumers.
Ultimately we must reform the system so that banks actually loan money instead of create it. Borrowing money will then simply take money elsewhere out of the system and paying it down will simply make it available to another. Then, when debt is not longer passed as money, paying down debt is no longer the tail of a snake but as harmless as a mouse.
How do you think the 50's economy didn't go back into the depression before the war. The housing and automobile bubbles is how. No governamnt spending is going to making any really last bubble because it just builds debt on a false demand.
Hi texdav,
We have to build debt, thats the problem. A depression is a shrinking money supply. The recipe to solve it is to keep the money supply stable. However money is debt so in order to create new money we need more debt.
The solution is to convert the some 55 trillion in public and private debt into treasury notes and into a full reserve system. Banks will take a huge hit and will probably need to be nationalized until such time they reintroduced to private hands. T They have been guiltily of ill gotten gains for so long anyway and should be liquidated. They would need to begin charging for actual services instead of collecting the inflation tax. At such point buying stocks on margin or buying a house or cars will have NO effect on the money supply at all.
That would end once and for all the volatility of money which is behind the bubble effect. Treasury notes will no longer be considered debt but tax receipts unlike federal reserve notes that are nominally considered debt.
The healthcare industry is the next bubble, it's the only really hot sector of the economy.
Hi zoomzoom3,
Only if is results in a collateral asset which causes money creation. Stocks, houses and commodities all have contributed to bubbles because it becomes a bases for leverage.
Who will loan me money based upon a successful surgery? May I go to a bank with 10% down and get a loan for it? I can buy houses, commodities, and stock where the very thing I purchase serves as collateral. I can buy stock on margin where much of the stock I am purchasing is financed by the same stock I am buying. I could create 5 million out off nothing so long as I buy a collateral asset with it like a 5 million dollar house. Thats a bubble mechanism. Whats the health care bubble mechanism? How will it become a collateral asset that in effect monetizes it? When a bank creates money on a house purchase its essentially turning the house into money.
If there is a bubble effect the only place is probably equities related to health care. However nothing compares to real estate which is the grand daddy of collateral assets that has created gargantuan sized bubbles across the globe. What do we expect when a transaction is financed by the actual purchase in a fractional reserve system? What do we expect when the money is retired on the sale of the same asset? Its a bubble machine by design.
We have to build debt, thats the problem. A depression is a shrinking money supply. The recipe to solve it is to keep the money supply stable. However money is debt so in order to create new money we need more debt.
The solution is to convert the some 55 trillion in public and private debt into treasury notes and into a full reserve system. Banks will take a huge hit and will probably need to be nationalized until such time they reintroduced to private hands. T They have been guiltily of ill gotten gains for so long anyway and should be liquidated. They would need to begin charging for actual services instead of collecting the inflation tax. At such point buying stocks on margin or buying a house or cars will have NO effect on the money supply at all.
That would end once and for all the volatility of money which is behind the bubble effect. Treasury notes will no longer be considered debt but tax receipts unlike federal reserve notes that are nominally considered debt.
Unfortunately, it seems like this will never happen though. He who controls the money has all the power...Unless somehow the 'sheep' magically wake up and realize what's going on...
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