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Debt is money, money is debt.. without debt growth global growth stalls and you get deflation... zero interest rates might be able to sustain the fractional reserve banking empire because without interest you don't have more money to pay back than exists to be paid back.. if they managed negative interest rates they could in theory go on forever.. the question is who would take bonds at zero interest besides central banks? Apparently a lot of countries do because they know it's in their best interest to launder each other's debt to keep the liquidity circulating.. wouldn't want the economy to suffer a heart attack.. it would take down most the planet like a chain of dominoes now... maybe we can grind along like Japan has with relatively low growth rates rather than have some big deflationary implosion from debt bubbles bursting.. time will tell. I think they don't even know the final outcome, the bankers I mean.
....I agree C2BP, the Fed should have moved to increase rates in the early 2000's, despite the War on Terror. Greenspan blinked and it allowed a new bubble to replace an old one. However, it was fighting an expensive overseas war that consumed a significant amount of money. Our wars of older generations were fought while the US economy generated a trade surplus like we haven't seen in decades. Our redistribution of cash back to other lands was in bombs and rebuilding.
Now. Now the Fed is pumping money into an economy that leaks like a mesh net.......
The Fed failed and it should be PROSECUTED FOR TREASON. Here's the basic law. Weak Dollar inflates the world by encouraging borrowing and SPENDING. Strong Dollar deflates the world by encouraging SAVING.
The FED's position has been that SPENDING and BORROWING MORE TO SPEND MORE is GROWTH. Hence, Borrowing and Spending should be encourage perpetually.
SAVING is the enemy. SAVING shrinks the world. A Strong Dollar shinks the world. QE, and all of its offshoots, has been a great Dollar Weakening. Of course, SAVING is not the enemy. But SAVING CYCLES have hisitorically crushed the world and are equated, in a limited mind, only with economic depression. But there is also a good side to the SAVING CYCLE, which the FED does not or does not want to see. The SAVING CYCLE deflates the debt bubble. The SAVING Cycle limits debt to the Growing season only (1983-2001). The SAVING CYCLE transfer power from the 1% (the Speculator Class) to the 99% (the Have Nots) - thereby preserving the society. The SAVING CYCLE helps the 99% earn safe investment money and provide a nest-egg for investing when the next Bull Market, Growing Cycle, Business Cycle, begins.
We have done everything wrong that we could possibly do wrong and we have more debt today than in 2001. We have not done our job. We still have a MASSIVE DEFLATION coming, and a Global Depression.
The Fed failed and it should be PROSECUTED FOR TREASON. Here's the basic law. Weak Dollar inflates the world by encouraging borrowing and SPENDING. Strong Dollar deflates the world by encouraging SAVING.
The FED's position has been that SPENDING and BORROWING MORE TO SPEND MORE is GROWTH. Hence, Borrowing and Spending should be encourage perpetually.
SAVING is the enemy. SAVING shrinks the world. A Strong Dollar shinks the world. QE, and all of its offshoots, has been a great Dollar Weakening. Of course, SAVING is not the enemy. But SAVING CYCLES have hisitorically crushed the world and are equated, in a limited mind, only with economic depression. But there is also a good side to the SAVING CYCLE, which the FED does not or does not want to see. The SAVING CYCLE deflates the debt bubble. The SAVING Cycle limits debt to the Growing season only (1983-2001). The SAVING CYCLE transfer power from the 1% (the Speculator Class) to the 99% (the Have Nots) - thereby preserving the society. The SAVING CYCLE helps the 99% earn safe investment money and provide a nest-egg for investing when the next Bull Market, Growing Cycle, Business Cycle, begins.
We have done everything wrong that we could possibly do wrong and we have more debt today than in 2001. We have not done our job. We still have a MASSIVE DEFLATION coming, and a Global Depression.
C2BP, you are correct. If the world started saving and hording cash. If they stopped taking loans and started repaying them, there would be a horrific and massive deflation in the world economy. The rich would lose more than the poor with what they have in economic wealth. The giant infrastructure we've built would be too expensive to run and would collapse. Law and Order would break down.
Where you are wrong is that there would be no safe investment. The banks would be insolvent. Even cash on hand would be worthless. Gold might be worth something, but at a much lower rate, and that assumes you can store it safely. There simply wouldn't be anything of value to buy. Valuation would be based upon scarcity in a world that has too many people to rely upon a broken infrastructure.
Until that day, debt will continue to rise. There are two ways off the treadmill for society. 1 is a complete and utter breakdown...and mankind loses. The other is a fulfillment in providing for one another in a shared manner, supplied by robotic and voluntary labor in a manner we can all agree too. In the meantime, the can keeps getting kicked, buying ourselves a bit more time to try and achieve utopia.
The Fed isn't perfect, but it's the best functioning piece of machinery we have at the moment. Get the Congress working first, then worry about the Fed.
Had Congress been working the past decade the FED would have raised rates by now.
When the FED has to lower rates that's when Congress is supposed to do programs such as infrastructure spending. Now they're talking about infrastructure, but it's probably 4 years late. The FED has held rates down because government hasn't done it's part. Now the FED is with it's back against a wall. They're nearing the end of an economic cycle and they haven't been able to reset the cards in their hand, they're still out on the table.
It's a balancing act. Congress has failed this country, not the FED. While the FED changed drastically under Greenspan's weak leadership and those who followed, we've also been stuck with a decade of a do nothing Congress that would rather play schoolyard name calling games then get a job done.
The Fed controls monetary policy. Congress controls fiscal policy. The latter is by far the more powerful of the two. Both should work in tandem to keep the economy strong and moving forward. But starting in 2011, Congress simply backed off and quit doing its job.
Ironically, the Fed's ability to push credit to the masses is what allows such large debts to be amassed. If price is set by demand and supply, adding credit will act as a stimulus to demand, and the increase in prices will act as a stimulus to supply.
A home is a family's largest purchase, it's largest asset. An American home is worth much more than say one located in Nigeria. But on utility it acts (mostly) the same. On utility as shelter they would be worth about the same. But an American home can be used as collateral for debt whereas a Nigerian one has few options.
How many Nigerian homes do you think are built well enough that they would meet safety codes if they were in the US?
C2BP, you are correct. If the world started saving and hording cash. If they stopped taking loans and started repaying them, there would be a horrific and massive deflation in the world economy. The rich would lose more than the poor with what they have in economic wealth. The giant infrastructure we've built would be too expensive to run and would collapse. Law and Order would break down.
Where you are wrong is that there would be no safe investment. The banks would be insolvent. Even cash on hand would be worthless. Gold might be worth something, but at a much lower rate, and that assumes you can store it safely. There simply wouldn't be anything of value to buy. Valuation would be based upon scarcity in a world that has too many people to rely upon a broken infrastructure.
Deflation + Depression together with higher interest rates will make our currency much stronger - opposite of worthless. Yes, majority of big banks or too big to fail banks will go under and they should go bankrupt and not even exist today. We will all experience massive pain and sufferings. Massive defaults and bankruptcies are waiting for us. We need to press the re-set button!!!!!
Deflation is a season a nation must go through to get to the other side, to economic growth season. The alternative is diet of the Obama-Bernanke-Yellen crowd, negative interest rates, free money to deny reality.
But nothing is improving, our economy is not improving. We are STUCK. We need to do the hard work again. Borrowing money isn't the hard work. Having the FED become a nanny state is not the hard work. The hard work is building a new economy. Before we can build a new economy we need to allow Deflation and Depression to do it's job. Deflation and Depression has a negative side, yes; but it also has a positive side. Like everything in nature, it is dual. Even eras of peace and prosperity have a negative side, which we don't like to admit. But look at our Peace and Prosperity side of the equation - we have a large amount of our populace in prison, in mental hospitals, on drugs, on alcohol, disabled, unable to find work, homeless, living in poverty, diseased.
To get to the other side of the board (and this is a metaphor) we have to go through difficulty. Some people say we do not have to go through difficulty - you guys can continue believing those people if you wish. They have been leading you into deeper debt and posibble negative interest rates. Continue to follow them if you wish. See where it gets you. We need to destroy the Debt Bubble that our self-indulgence has given us. This means higher interest rates, deflation, lower prices, and a 'drying out' of the 'feel good' economy. Consumption is one side of the equation - but PRODUCTION is the other side, the side we seem to have forgotten. Producing. This will also include nationalism and protectionism, side effects of this drying-out process. Think of us as an alcoholic who is trying to get straight again. That is an apt metaphor. We have become addicted to low interest rates, borrowing, spending.
WE NEED TO SAVE our currency, our US Dollar. WE NEED TO SAVE OUR CITIZENS (from higher prices for almost everything); SAVING our CITIZENS from the rule of the speculators and the banks.
Sometimes life is easy and sometimes it is difficult. If we try to turn back when it gets difficult, we lose. If we take on the difficulties, and vanquish these difficulties, collectively, as a nation, then we get to reach the Rebirth Season again.
We are suffering from an identity crisis. We are lost in the woods now, not knowing the way out, not really knowing who we are as a nation. Our brilliant leaders have failed us. The nation is our source, our roots - if we don't figure out who and what we are as a nation, we don't get to continue on this journey. It's a very simple question of national survival. If we figure it out, we get to survive. If we don't figure out who and what we are, then the wheel stops.
Your head spins because you don't understand economy or how economy supposed to work. You are not alone, majority is always wrong.
Any economy that NEEDS zero interest rates to sustain its debt burden IS already a destroyed economy.
In order for you to be right, not only must the majority by wrong, but so is the entire Fed and almost every economist.
Please explain again how you got your knowledge of economics.
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