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View Poll Results: What Are YOU Cutting Back For the Economy? (Choose As Many As You Want)
Smaller House or Apartment 15 23.08%
Get Rid of Pets 2 3.08%
Private School for Children 6 9.23%
Older or Smaller Car/ No New Car 29 44.62%
Boat/ RV/Motorcycle or Other Vehicle 7 10.77%
Internet/Cable or Satellite TV or Radio 11 16.92%
Wal*Mart Instead of Grocery Stores or Dept Stores 17 26.15%
Cell Phones/ Home Phone 4 6.15%
Delay Retirement 14 21.54%
Delay College/ Children's College 4 6.15%
Not Taking Vacation/ Vacation Close To Home 34 52.31%
Stop or Cut IRA Contributions 13 20.00%
Other 16 24.62%
Multiple Choice Poll. Voters: 65. You may not vote on this poll

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Old 03-05-2009, 06:19 PM
 
Location: Chino, CA
1,458 posts, read 2,904,774 times
Reputation: 546

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Quote:
Originally Posted by gwynedd1 View Post
Hi chuck22b,

How so? The seller got his money and the bank can't collect from the default. Money does not disappear after a default. If someone "borrows" 250k for a house and defaults he still gave it to the seller. Now the seller has 250k with the buyer on the hook to retrieve the 250k + interest. If the buyer/debtor defaults, its free "wildcat" money for the seller. Its a non interest bearing source of money for the rest of us. Defaults are good with respect to this since it reduces the debt pressure. Obama is just jacking it up. Every time the government "helps" people pay its just more monetary destruction. The only thing that disappears is a bank asset with a default which according to the accounting rules can make them insolvent if they lose too many.
Your forgetting where that 250k given to the seller goes.... it more than likely went back into a bank. Furthermore, as debtor's default - banks lose an asset which needs to be "filled" or they become insolvent (unable to support the other loans they lent out and deposit obligations). How do they fill this hole? They use their deposits (250k from seller) and/or tighten lending. If that still doesn't work, they liquidate assets, layoff people, and you get the point... ultimately if all else fails the banks also default. So, who ends up with the bill? Who is left to cover all the deposits? FDIC covers as much as they can, depositors lose a chunk, shareholders lose everything.

So, a default isn't interest free money to the "seller" unless they hold it as cash outside of the banks. So yes, the guy that defaults is getting rid of their debt load the fastest. But, this is at the expense of the bank, and the bank's depositors, and all the other ancillary institutions - ultimately everybody is involved if the government comes in.

Quote:
If they really wanted money to go into circulation they would allow defaults and lower taxes , give tax credits, what ever.
Mass unfettered defaults would ultimately result in the loss of deposits (the seller's so called interest free money) unless the government comes in. Most of the money out there is "sitting" (not really there but already loaned out) in banks. Only a very small percent is actually able to be withdrawn (10%?) and considered available for circulation.

All the tax credits and cuts couldn't make up nearly the amount of money destruction caused by massive defaults. If the Government were to avoid the banking system and let it collapse and focus on just tax credit and cuts to increase the money supply (as a large chunk would be destroyed when banks default), then the government would surely be over indebted.... many times over the 11 trillion people are already fretting about.

-chuck22b
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Old 03-05-2009, 06:30 PM
 
Location: IN
20,241 posts, read 34,633,689 times
Reputation: 12591
It is scary even watching some of the financial news that is currently transpiring. I think the rapidly falling DOW is causing a severe crisis of confidence among a good segment of the population. The S&P 500 is a more accurate indicator of where the overall market is going, though.
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Old 03-05-2009, 08:02 PM
 
17,752 posts, read 15,100,919 times
Reputation: 6378
Quote:
Originally Posted by chuck22b View Post
Your forgetting where that 250k given to the seller goes.... it more than likely went back into a bank. Furthermore, as debtor's default - banks lose an asset which needs to be "filled" or they become insolvent (unable to support the other loans they lent out and deposit obligations). How do they fill this hole? They use their deposits (250k from seller) and/or tighten lending. If that still doesn't work, they liquidate assets, layoff people, and you get the point... ultimately if all else fails the banks also default. So, who ends up with the bill? Who is left to cover all the deposits? FDIC covers as much as they can, depositors lose a chunk, shareholders lose everything.

So, a default isn't interest free money to the "seller" unless they hold it as cash outside of the banks. So yes, the guy that defaults is getting rid of their debt load the fastest. But, this is at the expense of the bank, and the bank's depositors, and all the other ancillary institutions - ultimately everybody is involved if the government comes in.

Mass unfettered defaults would ultimately result in the loss of deposits (the seller's so called interest free money) unless the government comes in. Most of the money out there is "sitting" (not really there but already loaned out) in banks. Only a very small percent is actually able to be withdrawn (10%?) and considered available for circulation.

All the tax credits and cuts couldn't make up nearly the amount of money destruction caused by massive defaults. If the Government were to avoid the banking system and let it collapse and focus on just tax credit and cuts to increase the money supply (as a large chunk would be destroyed when banks default), then the government would surely be over indebted.... many times over the 11 trillion people are already fretting about.

-chuck22b
Hi chuck22b,

Just spend treasury notes into circulation. Done. How many do you want? We can start with 11 trillion. We don't even need a tax. We will need to rebuild credit markets but then they are in shambles anyway. It might take some getting used to not have asset bubbles, inflation/deflation and bank runs but thats life.

BTW if said bank fails then the 250k will be deposited somewhere else. Then they will have the reserve. Defaults don't shrink the money supply. Right now banks are loaded to the gills with reserves so its not a problem.
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Old 03-05-2009, 10:56 PM
 
Location: Charlotte, NC
2,193 posts, read 4,458,789 times
Reputation: 1072
Quote:
Originally Posted by gwynedd1 View Post
Hi chuck22b,

How so? The seller got his money and the bank can't collect from the default. Money does not disappear after a default. If someone "borrows" 250k for a house and defaults he still gave it to the seller. Now the seller has 250k with the buyer on the hook to retrieve the 250k + interest. If the buyer/debtor defaults, its free "wildcat" money for the seller.
But if someone defaults on a home that is 500K and then the seller can only sell it for 200K, then 300K is destroyed right? But that 200K is free 'wildcat' money for someone to borrow?

Quote:
The government could easily create as much money as it likes. Its a computer entry. Money shortage is nothing but mass delusion.

Just actually look at whats happening. Does anyone even know what bank insolvency really is? How many people even know what these trillion in bailouts really are. Does anyone know why an insolvent bank can run like a "zombie" for years ala Japan?
The treasury created computer entries for US treasuries into bank account who then took those treasuries and used them as collateral to borrow from the FED as .25% interest who then deposit this money and the FED pays them .25% interest. Now they have reserves to lend. Then the banks don't lend. Its all book entires to conform to bank accounting rules. LOL
Ok can you clarify your last sentence/paragraph? Are you referring to Open Market Operations? I just started reading the comic book publication issued by the Fed and trying to figure it out. What are the computer entries for US Treasuries? Is it an actual dollar amount? Is that the security that the Treasury sells to the Fed for money?
I'm also confused as to this: the Fed pays the Treasury .25% interest as you said? I thought it was the other way around?
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Old 03-06-2009, 10:06 AM
 
Location: Ocean Shores, WA
5,082 posts, read 12,622,393 times
Reputation: 10556
I will give up nor change nothing in my life, except that I will may more attention to yard sales and listings on Craigslist.

Maybe I can find a good deal on that new fishing boat I've been looking for.

I'm sure that some of these poor bastards who can't pay their mortgage might be selling off some of the toys they went into debt to buy.
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Old 03-06-2009, 12:22 PM
 
17,752 posts, read 15,100,919 times
Reputation: 6378
Quote:
Originally Posted by sheenie2000 View Post
But if someone defaults on a home that is 500K and then the seller can only sell it for 200K, then 300K is destroyed right? But that 200K is free 'wildcat' money for someone to borrow?
Hi sheenie2000,

Actually no. Only the bank asset is destroyed. The money for the 500k is in the hands of the seller. It may impact future money creation since an asset has depleted and a borrower has lost credit status.



Quote:
Ok can you clarify your last sentence/paragraph? Are you referring to Open Market Operations? I just started reading the comic book publication issued by the Fed and trying to figure it out. What are the computer entries for US Treasuries? Is it an actual dollar amount? Is that the security that the Treasury sells to the Fed for money?
I'm also confused as to this: the Fed pays the Treasury .25% interest as you said? I thought it was the other way around?
What happened with the bailout is not really an open market operation. Open market operations are considered normal. The bail out is something new buts its really just circular money to satisfy bank accounting rules. Under the right conditions it could be inflationary which is basically business as usual making money out of thin air. The Treasury gave banks treasury bonds and now have enough assets. The Fed also allowed the banks to use junk bonds as collateral as well. The banks borrowed money using these "reserves/bond" for money and then deposited this money with the FED. Its no more than keeping score in scrabble.

Open market operations basically involves buying or selling securities. Buying bonds exchanges money for bonds increasing the money supply since the FED infinitely creates money. Other bond purchases come from the existing money supply so its neutral. So rule of thumb is when the fed buys anything like a repo etc its to increase money. When the Fed sells securities money must come out of the economy to buy them. This will reduce the money supply like a reverse repo etc.

You can also see here.
HowStuffWorks "How the Fed Works"


The problem is that Fed system is like a rope. It can always pull at money. It can pull harder or not so hard. It can't push with a rope. It really was not designed to do so. The Fed, if it wants, can always stop inflation if it chooses. Volker demonstrated that.

They really do have a very complex problem. If for example the Spartans beat, impoverished, and killed off most of their helots they will have trouble supporting their arrangement.
Since banks have completely saturated the debt carrying power of its host( the true engine of debt currency), the us citizen, its really very tough and they have some of the brightest(and evil) minds working on the problem(this process is also being observed by the Washington idiot class). The solution will be financial cannibalism in one form or another until some point the us citizen creates some new capital to be acquired through predatory financing.
However for us its pretty simple, much like the helots. How do we get rid of these Spartans oppressing us?
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Old 03-06-2009, 12:36 PM
 
Location: Chino, CA
1,458 posts, read 2,904,774 times
Reputation: 546
Quote:
Originally Posted by gwynedd1 View Post
Hi sheenie2000,

Actually no. Only the bank asset is destroyed. The money for the 500k is in the hands of the seller. It may impact future money creation since an asset has depleted and a borrower has lost credit status.



What happened with the bailout is not really an open market operation. Open market operations are considered normal. The bail out is something new buts its really just circular money to satisfy bank accounting rules. Under the right conditions it could be inflationary which is basically business as usual making money out of thin air. The Treasury gave banks treasury bonds and now have enough assets. The Fed also allowed the banks to use junk bonds as collateral as well. The banks borrowed money using these "reserves/bond" for money and then deposited this money with the FED. Its no more than keeping score in scrabble.

Open market operations basically involves buying or selling securities. Buying bonds exchanges money for bonds increasing the money supply since the FED infinitely creates money. Other bond purchases come from the existing money supply so its neutral. So rule of thumb is when the fed buys anything like a repo etc its to increase money. When the Fed sells securities money must come out of the economy to buy them. This will reduce the money supply like a reverse repo etc.

You can also see here.
HowStuffWorks "How the Fed Works"


The problem is that Fed system is like a rope. It can always pull at money. It can pull harder or not so hard. It can't push with a rope. It really was not designed to do so. The Fed, if it wants, can always stop inflation if it chooses. Volker demonstrated that.

They really do have a very complex problem. If for example the Spartans beat, impoverished, and killed off most of their helots they will have trouble supporting their arrangement.
Since banks have completely saturated the debt carrying power of its host( the true engine of debt currency), the us citizen, its really very tough and they have some of the brightest(and evil) minds working on the problem(this process is also being observed by the Washington idiot class). The solution will be financial cannibalism in one form or another until some point the us citizen creates some new capital to be acquired through predatory financing.
However for us its pretty simple, much like the helots. How do we get rid of these Spartans oppressing us?
Let the helots default... and have the banks consolidate and contract?

Ultimately, at the expense of the shareholders, investors, pension funds, depositors, gov co, etc.

I called it the peasant revolution in another thread... but it's going to take a lot of us with it in terms of jobs, and accumulated wealth.

-chuck22b
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Old 03-06-2009, 01:36 PM
 
3,219 posts, read 5,667,862 times
Reputation: 1839
IMO The right question would be: What Will The Politicians Sacrifice For The American Citizens and The Economy?
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Old 03-06-2009, 01:49 PM
 
17,752 posts, read 15,100,919 times
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Quote:
Originally Posted by chuck22b View Post
Let the helots default... and have the banks consolidate and contract?
Hi chuck22b,

The big NY banks crossed with investment banks. Absolutely. Let local charter banks take over. It will eventually lead to the same thing but this one would be flushed out.


Quote:
Ultimately, at the expense of the shareholders, investors, pension funds, depositors, gov co, etc.

I called it the peasant revolution in another thread... but it's going to take a lot of us with it in terms of jobs, and accumulated wealth.

-chuck22b


We don't need these kinds of banks. Our credit rating system is already ruined. Thats all they really did and then they just used the copula formula. So banking became something like:

The copula formula says this loan is an acceptable risk do you want to loan <y/n> ?

What do we need them for? We can replace them with bond markets. Thats were all the money comes from anyway for housing. All I remember about Adam Smith saying is how horrible banks were at assessing long term risk and generally functioned better in private bond markets who knew the business. All we need is to replace bank credit as a currency. Its the same junk that happened in the 1870's when the government wouldn't coin silver anymore and people were screaming stop contracting the currency. The surviving charted banks , along with new ones, can just take over the usual charted banking functions. All we would need to do is start funneling a replacement currency into the economy. Tax policy can direct the growth in the right direction. Its really very simple.

We can always bailout deposits the FDIC and what not and anything related to a good or service.
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