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Old 12-29-2011, 02:05 PM
Status: "ABCDEFGplus" (set 21 days ago)
 
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http://www.paecon.net/PAEReview/issue58/Koo58.pdf

Someone who gets it right because he knows what money is.

The key difference between an ordinary recession and one that can produce a lost decade is that in the latter, a large portion of the private sector is actually minimizing debt instead of maximizing profits following the bursting of a nation-wide asset price bubble. When a debt-financed bubble bursts, asset prices collapse while liabilities remain, leaving millions of private sector balance sheets underwater

This can happen only in progressive countries because of the law of rents. When economic rent first appears, there becomes a speculation as to the assets ability to produce. This can create land that is worse than Nevada desert because the speculative value exceeds its ability to produce. 10 coconut rents on 9 coconut islands are worse than sea water. Better to have no coconuts than to go into debt one coconut.

Economic rent speculation beyond the ability to pay. Read it and weep, again.

When are we going to get rid of the rentiers?
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Old 12-29-2011, 04:13 PM
 
Location: Vallejo
15,779 posts, read 17,745,311 times
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Which is why I generally don't have any problem with people walking away from a 500 coconut mortgage on a 300 coconut house, aka strategic default. That has nothing to do with beyond ability to pay necessarily. Plenty of people defaulting could continue to make the payments on the bank's house. If you have a mortgage, it's not your house. It's the bank's house, and the terms of the lease to own mortgage are very favorable to the buyer.
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Old 12-29-2011, 05:15 PM
Status: "ABCDEFGplus" (set 21 days ago)
 
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Quote:
Originally Posted by Malloric View Post
Which is why I generally don't have any problem with people walking away from a 500 coconut mortgage on a 300 coconut house, aka strategic default. That has nothing to do with beyond ability to pay necessarily. Plenty of people defaulting could continue to make the payments on the bank's house. If you have a mortgage, it's not your house. It's the bank's house, and the terms of the lease to own mortgage are very favorable to the buyer.

Even this faulty system of ponzi banking has as a remedy defaults and falling prices. Trains might not stop too well but they have brakes. What did we do? More coal, more steam..."to save the system".

Now banks have grown bigger than too big to fail so why are they not being broken up? After 4 years we have no actual system to promote sound business. What have we been doing for 4 years? Who is for this? Lefties? Righties? I thought the lefties were against corporate welfare? I thought the righties were for competition? Vote for the default, idiot, major party candidate anyway?
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Old 12-30-2011, 04:16 PM
 
28,900 posts, read 48,716,988 times
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Well, I think saying "Balance Sheet Recession" is the same thing as saying "Depression." Because a recession is a price adjustment while a depression is a balance sheet adjustment. The Great Depression was caused by mushrooming credit followed by an abrupt tightening of credit. The Depression of 1920 and the Long Depression had many of the same basic problems, too.

But nobody likes to use the term Depression.
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Old 01-18-2012, 03:21 PM
 
Location: 3rd Rock fts
748 posts, read 1,000,017 times
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Quote:
Originally Posted by gwynedd1
Someone who gets it right because he knows what money is.
Just because he gets it right doesn’t mean he is right.

He said for Gov’ts to not worry about what to spend stimulus money on—just spend it. Only during wartime should Gov’t focus stimulus spending—on war stuff obviously. He admits that you can’t get citizens to continue irresponsible spending for long periods of time during peacetime; so he implies that it's better to be @ war when you’re trying to fix balance sheet recessions.

I learned a lot from your threads/posts gwynedd1, but I have to ask: “Are you worried about Gov’t & or consumer Moral Hazard with all this ignoring of the RULES?" I want to live in a world where the Economy benefits society, not where the Economy holds society hostage by constant harassment to spend every last spare dime in their pocket.

Last edited by DSOs; 01-18-2012 at 03:22 PM.. Reason: said instead of says
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Old 01-19-2012, 07:43 AM
 
Location: San Diego California
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This is not a balance sheet recession. It is a job loss recession. America's manufacturing base has been decimated by outsourcing. Wealth comes from manufacturing, and one look at Detroit will show you what happens when manufacturing is replaced with service based jobs.
While it is true that people are not earning what they need to in relation to spending, you have to take it one step farther and look at why they are not earning. It is because the engine that powered our economy has been exported to other countries in order to make higher profits for Wall St.
Bring the jobs back, and the economy will fix itself. Allow Wall St to dictate America's trade policies and you will get more of what we have gotten since 2008.
If you do not believe it look at what economists and the World Bank are saying about round 2 of the recession beginning this year.
Service sector jobs produce no dividends; it is manufacturing that produces collateral jobs and wealth.
You have seen with your own eyes the results.
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Old 01-19-2012, 09:59 AM
Status: "ABCDEFGplus" (set 21 days ago)
 
18,983 posts, read 16,715,040 times
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Quote:
Originally Posted by DSOs View Post
Just because he gets it right doesn’t mean he is right.

He said for Gov’ts to not worry about what to spend stimulus money on—just spend it. Only during wartime should Gov’t focus stimulus spending—on war stuff obviously. He admits that you can’t get citizens to continue irresponsible spending for long periods of time during peacetime; so he implies that it's better to be @ war when you’re trying to fix balance sheet recessions.

I learned a lot from your threads/posts gwynedd1, but I have to ask: “Are you worried about Gov’t & or consumer Moral Hazard with all this ignoring of the RULES?" I want to live in a world where the Economy benefits society, not where the Economy holds society hostage by constant harassment to spend every last spare dime in their pocket.

I am glad you get something out of it.

Most of my posts, for what they are worth, needs to be read specifically to the point I am trying to make. There are descriptions and prescriptions, points of view and the aggregate. As of now most people use a defunct economic model of commodity back money. You cannot have any rational position without knowing the world we are in. Since 1971 we are in a fully chartalist monetary system with the caveat of an all powerful financial cartel as a rival to the appetite of the treasury. I am concerned about the moral hazard.

So what separates me from an Austrian sound money philosophy? Pragmatism. I am willing to use the same weapon the bankster have been using against the middle class. If you have control of government, you have it; so use it. The reason is you must destroy the power base of the money changers which have gotten the best of their ancient rivals, the landed gentry. Thus we must first return to a more powerful landed class, that is widely dispersed(I'll get to that) . Once we undue the damage, then we can think about boxing in the money changers again. They were boxed in with Bretton Woods and fixed exchange rates. Now the genie is out of the bottle with currency speculating and bailouts, running amok. You have to get back what was robbed.

The other problem with the Austrians is they have no policy against the other heavy weight power, the landed gentry which will emerge without their money changer rivals. Thus we need land value taxes and regressive land value exemptions to disperse privately held lands. We have two perfect examples of what not to do, Quesnay's enemy of French feudalism and Adam Smith's British enemy of merchantalism, respectively the two great powers of ruler-ship, and unproductive sloth.
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Old 01-19-2012, 10:03 AM
Status: "ABCDEFGplus" (set 21 days ago)
 
18,983 posts, read 16,715,040 times
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Quote:
Originally Posted by jimhcom View Post
This is not a balance sheet recession. It is a job loss recession. America's manufacturing base has been decimated by outsourcing. Wealth comes from manufacturing, and one look at Detroit will show you what happens when manufacturing is replaced with service based jobs.
While it is true that people are not earning what they need to in relation to spending, you have to take it one step farther and look at why they are not earning. It is because the engine that powered our economy has been exported to other countries in order to make higher profits for Wall St.
Bring the jobs back, and the economy will fix itself. Allow Wall St to dictate America's trade policies and you will get more of what we have gotten since 2008.
If you do not believe it look at what economists and the World Bank are saying about round 2 of the recession beginning this year.
Service sector jobs produce no dividends; it is manufacturing that produces collateral jobs and wealth.
You have seen with your own eyes the results.
What you are missing is the domestic supply of credit to those would be manufacturers is missing, along with their consumers who are now dedicated consumers of debt service.

We have debt over head, the competition has much less.
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Old 01-19-2012, 11:01 AM
 
Location: San Diego California
6,797 posts, read 6,588,928 times
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Quote:
Originally Posted by gwynedd1 View Post
What you are missing is the domestic supply of credit to those would be manufacturers is missing, along with their consumers who are now dedicated consumers of debt service.

We have debt over head, the competition has much less.
People who say this is a balance sheet recession are putting the cart before the horse.

The debt service, is a direct result of people who were using credit (REFi's /HELOCS) to support a lifestyle that was not being supported by wages.

The entire housing bubble was contrived to conceal the income losses from outsourcing.

Without the housing bubble ponzie scheme, the people would have protested outsourcing and the Wall St. bankers would have never been able to make trillions off the entire fiasco.

The bottom line is that the balance sheets of the people did not cause the loss of jobs in the country. It was the loss of jobs that caused the balance sheet problems.
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Old 01-19-2012, 11:15 AM
Status: "ABCDEFGplus" (set 21 days ago)
 
18,983 posts, read 16,715,040 times
Reputation: 7404
Quote:
Originally Posted by jimhcom View Post
People who say this is a balance sheet recession are putting the cart before the horse.

The debt service, is a direct result of people who were using credit (REFi's /HELOCS) to support a lifestyle that was not being supported by wages.
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.


Quote:
The entire housing bubble was contrived to conceal the income losses from outsourcing.
Not entirely untrue, though it actually accelerates those losses. Can't work cheap when the mortgage is 3k a month can you?


Quote:
Without the housing bubble ponzie scheme, the people would have protested outsourcing and the Wall St. bankers would have never been able to make trillions off the entire fiasco.
Would they have? I guess I win the prize for being more cynical.


Quote:
The bottom line is that the balance sheets of the people did not cause the loss of jobs in the country. It was the loss of jobs that caused the balance sheet problems.
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.
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