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Old 01-19-2012, 01:03 PM
 
Location: 3rd Rock fts
749 posts, read 1,004,583 times
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The way I see it; steering/relying on balance sheet recessions=Moral Hazard. 2000-2008 proved to me that NOBODY wants to minimize debt, or invest in society’s needs, during the good times—an important component of balance sheet recessions, according to this article.

Let’s say the FED/World continues stimuli (QE3 to QE11) for the next 10+ years to ride out the balance sheet recession(s). It's now circa 2022 & the world Economy is solid & stable. What's going to deter the financial Elitists from racing the world Economy, via quicker/choppier boom/bust cycles, to the next balance sheet recession (circa 2040); & then the next (circa 2055)? I hope you see where I'm going with this?

The article says/assumes that it'll be a long time (previous history) until the next balance sheet recession; so we shouldn't be concerned because we will forget. However, each Generation is getting deviously, smarter with playing this game of abusing credit/debt. This, & future generations will NOT forget the advantage of consumer moral hazard.

You have said that 99% of the citizenry doesn't understand how money works. The IRONY is that you need 99% of the citizenry to be clueless if the facts explained in this article are to keep holding true going forward.

Last edited by DSOs; 01-19-2012 at 01:06 PM.. Reason: deleted comma
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Old 01-19-2012, 07:16 PM
 
19,337 posts, read 16,927,911 times
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Quote:
Originally Posted by DSOs View Post
The way I see it; steering/relying on balance sheet recessions=Moral Hazard. 2000-2008 proved to me that NOBODY wants to minimize debt, or invest in society’s needs, during the good times—an important component of balance sheet recessions, according to this article.
There is a money system I wish for, and then the one we have.

Quote:
Let’s say the FED/World continues stimuli (QE3 to QE11) for the next 10+ years to ride out the balance sheet recession(s). It's now circa 2022 & the world Economy is solid & stable. What's going to deter the financial Elitists from racing the world Economy, via quicker/choppier boom/bust cycles, to the next balance sheet recession (circa 2040); & then the next (circa 2055)? I hope you see where I'm going with this?
This is precisely the problem. QE is the problem, not the solution. The Fed works through the banking system. The private credit system is in a word, broke. QE inflates asset prices. What needs to happen is to either deflate them or inflate wages. That is only going to happen by running deficits and putting it in the goods and services economy. There is a world of difference between QE on its own and fiscal policy.

What people naturally assume to be perfectly benign in a gold mine under a gold standard, suddenly fail to understand that deficits are a monetary mine. You must have some increase in the money supply. The credit that banks create is only principle, loaned into existence. If the private credit system is not at least moderately expanding, we will enter the liquidity trap without public credit.

Quote:
The article says/assumes that it'll be a long time (previous history) until the next balance sheet recession; so we shouldn't be concerned because we will forget. However, each Generation is getting deviously, smarter with playing this game of abusing credit/debt. This, & future generations will NOT forget the advantage of consumer moral hazard.
We are still in it.

Quote:
You have said that 99% of the citizenry doesn't understand how money works. The IRONY is that you need 99% of the citizenry to be clueless if the facts explained in this article are to keep holding true going forward.
Its hard to say what would happen if they knew. One thing they would know is depressions are easily avoidable.
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Old 01-20-2012, 01:54 PM
 
Location: 3rd Rock fts
749 posts, read 1,004,583 times
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Quote:
Originally Posted by DSOs
Let’s say the FED/World continues stimuli (QE3 to QE11) for the next 10+ years to ride out the balance sheet recession(s). It's now circa 2022 & the world Economy is solid & stable. What's going to deter the financial Elitists from racing the world Economy, via quicker/choppier boom/bust cycles, to the next balance sheet recession (circa 2040); & then the next (circa 2055)? I hope you see where I'm going with this?
The article mentions balance sheet recessions around the World, so I lumped it all together—my bad, I did mean economic stimuli by the USA & various Gov’ts around the World.
Quote:
Originally Posted by gwynedd1
That is only going to happen by running deficits and putting it in the goods and services economy.
This article, & I assume you, are implying that Economies are entitled to roughly 15 years of continuous Gov’t stimuli to correct/fix balance sheet recessions (BSRs). My question is: What prevents the financial Elitists from banking on/racing to future BSRs? The faster the Economy heads to the next BSR, the quicker you get Gov’ts to supply economic stimuli for 10+ more years. I see this as Moral Hazard.

I have another question: Why do CORPORATIONS have cash/healthy balance sheets? It looks like Corporations are also benefiting from this current balance sheet recession?!

Last edited by DSOs; 01-20-2012 at 01:56 PM.. Reason: added: the next
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Old 01-20-2012, 08:29 PM
 
19,337 posts, read 16,927,911 times
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Quote:
Originally Posted by DSOs View Post
The article mentions balance sheet recessions around the World, so I lumped it all together—my bad, I did mean economic stimuli by the USA & various Gov’ts around the World.
This article, & I assume you, are implying that Economies are entitled to roughly 15 years of continuous Gov’t stimuli to correct/fix balance sheet recessions (BSRs). My question is: What prevents the financial Elitists from banking on/racing to future BSRs? The faster the Economy heads to the next BSR, the quicker you get Gov’ts to supply economic stimuli for 10+ more years. I see this as Moral Hazard.

I have another question: Why do CORPORATIONS have cash/healthy balance sheets? It looks like Corporations are also benefiting from this current balance sheet recession?!

They don't even have to run stimulus, just a deficit. In other words just pay the expenses without taxing the money in. Let me show you how absurd what we are doing is.

Lets assume a simple chartalist system. All money is spent into existence by the government, and are good for paying taxes. Once enough of this script is in the economy and inflation begins to show, instead of creating new notes they tax them back in. So say we reach a point where 1 million is in circulation, the budget requires 100k annually and taxing 100k is keeping prices stable. Now lets say that 100k in notes at the bank burned in a fire. What should the government do?

A) Tax another 100k notes in and remove them from circulation.
B) Do nothing and leave the money supply at 900k.
C) Replace the 100k in notes.
D) Spend 100k more into the economy.
E) Spend 200k more into the economy.

A) If people want to raise taxes, and remember we have a completely fiat money just like the script above, then they want to shrink the money supply. Taxes are not a function of revenue. They are a function of inflation.

B) Here we have the balanced budget hawks. Again curious since 100k of the money supply is gone.

C) Probably the best thing to do especially for the people with money in the bank.

D) The next best option since at least the macro economy would notice much less of an issue.

E) Seems like too much of a good thing.


Does it seem a little more obvious that a deficit though say a regressive tax holiday of SS withholding would be in order when banks are burning money(paying principle destroys bank credit)?

Taxing to pay off the "debt" is a gun to the head and the American public, who does not know that the debt is the money, would pull the trigger. What is the difference between what we have and this system? As of now about 2% of future inflation(that can be taxed in with the flick of a pen to compete equalization, oh mercy me). We also allow the banks to create credit with fractional reserve(After all, why not institutionalize something that began as fraud from gold smiths...??? uh, yeah.) If that bothers anyone then they could mint some coins or make treasury notes.

There is more than a moral hazard. We have a lack of intellect hazard. But wouldn't knowing what the system is and forcing our government to use it correctly be better even if its potentially bad? As of now the potential is being realized.

Last edited by gwynedd1; 01-20-2012 at 08:37 PM..
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Old 01-24-2012, 08:36 AM
 
Location: San Diego California
6,797 posts, read 6,624,039 times
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Quote:
Originally Posted by gwynedd1 View Post
Its ironic that you say its not a balance sheet recession, yet you are consulting the balance sheet to define what can be afforded. The labor, capital and resources were available to build all those houses. However the banking system created this credit at a debt to themselves with a stroke of the pen. It may be a poor allocation of resources that could have been made available for something else, but affording has little to do with it. The housing is there as proof.
Now I'll agree those resources would have been better spent. .
The capitol was not available to build all those houses, that is the problem. The capitol was borrowed against nonexistent future earnings and to this day is not and will not be repaid. The balance sheet is simply as written form which indicates there is not enough income from jobs to repay debts incurred by people who were mistakenly thinking they would have good jobs.


Quote:
Originally Posted by gwynedd1 View Post
Would they have? I guess I win the prize for being more cynical. .


Cynical? How so? You do not believe that if the people feel pain they will not react? The problem is the government like a rock stars doctor will not let the public feel the pain. They use programs like unemployment and food stamps to keep the people thinking they are getting something for nothing.

Quote:
Originally Posted by gwynedd1 View Post
To an extent this is true. When you reach a tipping point in capital growth, which was started with outsourcing, its a negative feedback loop. Capital flight into wealth preservation sunk right into real estate making it even worse.
That feedback loop will now continue until we have an economic system similar to what there was in Europe prior to the formation of the US.
A 3 tiered system of the Uber wealthy / royalty, the regularly wealthy / lords, and a slave class / peasants unable to achieve upward mobility, property ownership, or proper education.
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Old 01-24-2012, 09:44 AM
 
19,337 posts, read 16,927,911 times
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Originally Posted by jimhcom View Post
The capitol was not available to build all those houses, that is the problem. The capitol was borrowed against nonexistent future earnings and to this day is not and will not be repaid. The balance sheet is simply as written form which indicates there is not enough income from jobs to repay debts incurred by people who were mistakenly thinking they would have good jobs.
You are going to have a hard time convincing me to look at the credit system to define economic capability. That is the reason why few people understand economics because they do precisely that. Our banking system is absolutely worthless at this point and relies on a speculative banking system. As I pointed out before, banks do not wait to accumulate "reserves". They make loans and then find the reserves. What this means is there is no real feedback on the existing surplus from the masses, or its completely ignored. Even with the massive savings rate and huge appetite for government debt, no one wants to use the idle surplus because they are errantly obsessed with booking keeping. What does paying off debt and saving money do? Nothing, absolutely nothing. Saving currency has no comparison to saving firewood or wheat in a barn. Handing over your currency is an attempt to tell someone else to spend it. Its not happening.


I believe economies happen in real time. Debt is simply a pschological affect. The resources were there, as we can see since the houses exist. If you want to win the argument then you have to present a case of opportunity cost for spending time building houses. Compare this to the opportunity costs of our recent wars. Thus we do not have "debt", we have an after the fact mis-allocation of resources. The "debt" will not be repaid because it can't be repaid. Thus the future in those terms is a fictitious one. We already paid because we didn't create real value.


Quote:
Cynical? How so? You do not believe that if the people feel pain they will not react? The problem is the government like a rock stars doctor will not let the public feel the pain. They use programs like unemployment and food stamps to keep the people thinking they are getting something for nothing.
I believe we have become a nation of poodles. I don't know what it would take to make use react.

Quote:
That feedback loop will now continue until we have an economic system similar to what there was in Europe prior to the formation of the US.
A 3 tiered system of the Uber wealthy / royalty, the regularly wealthy / lords, and a slave class / peasants unable to achieve upward mobility, property ownership, or proper education.

So long as the masses play by those rules, yes. Apparently they will because it says right there in the books that we owe them for printing money.
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