[quote]John S. wrote:
The problem is, is that the second we see deflation we will inflate again just this time with a much bigger dose.
Banks are loaning the money they are getting from the FED for .5% interest rates then loaning it to the government for 4%. This is what deflationists are looking over this fact right here disproves the deflationists idea that banks will hold the money.
Lets take a look at what deflation would do, look at all the social programs that would have to be eliminated/cut. Do you really think Obama is going to do that? No he will have Bernanke start quanitative easing, and through the big banks the money will be released. We have already seen them do this on a small scale. Cash for clunkers is a great example. So is the housing rebate. While we may look at them and say they where failures they will say the problem is it wasn’t big enough.
Make no mistake when the markets collapse we will fire up the printing press and the money will flow directly into the economy. Wether it be through “tax credits”, special deals, or banks loaning the money they are getting from the FED for .5% interest rates then loaning it to the government for 4%(which will be given by either the American people or the Fed).
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The only real option at this point is to repudiate all government debt, at every level. Local and state debt will have to settle for some lower amount, foreign debt and Fed debt should all simply be cancelled.
Our creditors won’t like it but they can’t collect anyway.
FWIW, I am doing my part to deleverage and deflate the economy. Since around Jan, My wife and I have saved 1,000 in an emergency savings fund and paid off 6,000 in debt without incurring a single penny in extra debt (aside from interest on current debt).
I also know quite a few other friends who have done something similar, though maybe not on the same level. But the main thing I hear is “lowering debt” of “getting out of debt” from most of my friends and family.
I think the country would be running so much beter if there were no personal credit cards, the only thing a person could get credit for would be a house or a car. And the car thing is not even really that good either since they depraciate so fast.
[quote]Vegita wrote:
FWIW, I am doing my part to deleverage and deflate the economy. Since around Jan, My wife and I have saved 1,000 in an emergency savings fund and paid off 6,000 in debt without incurring a single penny in extra debt (aside from interest on current debt).
I also know quite a few other friends who have done something similar, though maybe not on the same level. But the main thing I hear is “lowering debt” of “getting out of debt” from most of my friends and family.
I think the country would be running so much beter if there were no personal credit cards, the only thing a person could get credit for would be a house or a car. And the car thing is not even really that good either since they depraciate so fast.
V[/quote]
Debt is money, in a banking system such as ours. When debt is repaid, money is destroyed and deflation takes place.
[quote]Vegita wrote:
FWIW, I am doing my part to deleverage and deflate the economy. Since around Jan, My wife and I have saved 1,000 in an emergency savings fund and paid off 6,000 in debt without incurring a single penny in extra debt (aside from interest on current debt).
I also know quite a few other friends who have done something similar, though maybe not on the same level. But the main thing I hear is “lowering debt” of “getting out of debt” from most of my friends and family.
I think the country would be running so much beter if there were no personal credit cards, the only thing a person could get credit for would be a house or a car. And the car thing is not even really that good either since they depraciate so fast.
V[/quote]
Debt is money, in a banking system such as ours. When debt is repaid, money is destroyed and deflation takes place.
This is good.
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I know, which is why I’m being a good boy. Now can I haz a cookie?
[quote]Vegita wrote:
FWIW, I am doing my part to deleverage and deflate the economy. Since around Jan, My wife and I have saved 1,000 in an emergency savings fund and paid off 6,000 in debt without incurring a single penny in extra debt (aside from interest on current debt).
I also know quite a few other friends who have done something similar, though maybe not on the same level. But the main thing I hear is “lowering debt” of “getting out of debt” from most of my friends and family.
I think the country would be running so much beter if there were no personal credit cards, the only thing a person could get credit for would be a house or a car. And the car thing is not even really that good either since they depraciate so fast.
V[/quote]
Debt is money, in a banking system such as ours. When debt is repaid, money is destroyed and deflation takes place.
This is good.
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This.
This is mostly why I think we will have a very long period of slight economic growth as individuals pay down their debts. The increase in savings will most likely have a positive effect as well on the cost of capital.
Banks are loaning the money they are getting from the FED for .5% interest rates then loaning it to the government for 4%.
This is what deflationists are looking over this fact right here disproves the deflationists idea that banks will hold the money.
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So the gov is spending the money. The money enters average joes hands. And joe pays back his debt, destroying it, or he hoards it. Velocity slows down. Businesses prices lower. etc etc.
If the future starts to look a little brighter, I can see inflation occuring much more rapidly.
You may be right, but it seems the country may be wisening up along with the rest of the world. Obamas mini-stimulus has been shot down numerous times.
When do you predict this will happen? Hyperinflation, that is.
You may be right, but it seems the country may be wisening up along with the rest of the world. Obamas mini-stimulus has been shot down numerous times.[/quote]
When do you predict this will happen? Hyperinflation, that is.[/quote]
To your first point, When has Obama shown he cares what the American people think? My fear is the anything but a democrat attitude out their among some people will put in neo-cons that will vote to pass a stimulus. They voted on the last one, once they get back in power the two headed beast will emerge again and we will still be fucked. After seeing what happened here in Iowa, while a few states get it most are still full of sheep.
I think hyperinflation has a good chance of happening in 2012, and here is why. First in 2011 Bush’s tax cuts expire, when they do the economy will tank. Second, after november of this year nothing will change, they will return to their keynsian roots and fire up the printing press. Think about how many candidates are you seeing talk about the FED? A handfull maybe? They will turn to them to finance their wars, social programs that will go broke when the economy tanks. Everyone talks about cutting spending but when push comes to shove they never want to give up “their” programs. So even if the tax cuts get extended the government will still be unwilling to cut because know one wants to cut, they may talk about it but try telling a neo-con he can’t have a war, and try telling a socialist you can’t have welfare.
In the simplest terms, creditors will stop lending, which will keep the credit supply from inflating. And debtors will default, causing the supply of outstanding debt to deflate. This will overwhelm government and central-bank efforts to inflate, and will result in deflation. These trends have already begun.
Believe me, I understand people’s resistance to this scenario. The case for runaway inflation seems so logical. Over the past eight years, the Fed’s lending rates have twice fallen to zero, meaning that credit is free. The Fed has created $1.5 trillion of new money. Central banks around the world have offered unlimited, cost-free credit. The government is spending money like mad. And the Fed and the Treasury have bailed out or guaranteed another trillion or two of bad debt and promise to cover even more. Oh, and the Chairman of the Fed swore eight years ago that he would drop money from helicopters.
There is only one problem with the logic involved: It does not lead us to present conditions. In the great inflations of history - such as what occurred in Germany in the 1920s and Zimbabwe in the 2000s - several things happened: The money supply zoomed; interest rates soared to double and triple digits; commodity and stock prices went up; consumer prices rose relentlessly; and people raced to get rid of money as fast as they got hold of it.
Today, not one of these events is happening. In fact, the opposite is happening: M3 (a measure of the amount of money and credit in the system) is contracting at its fastest pace since the 1930s. Interest rates on Treasury bills are stuck at zero. The CRB index of commodities is at half its value of just two years ago. The stock market is lower than it was 10 years ago. The PPI and CPI (measures of producer and consumer prices) have a zero rate of change. People are struggling to get anyone to part with a dollar: They can’t get loans, they can’t sell their houses, and they can’t land a job. And Walmart is cutting prices. This is the “Bizarro” version of Germany and Zimbabwe: Everything’s backwards.
Illinois close to bankruptcy (in January of this year!)
"As a result, fiscal paralysis is spreading through state government. Unpaid bills to suppliers are piling up. State employees, even legislators, are forced to pay their medical bills upfront because some doctors are tired of waiting to be paid by the state. The University of Illinois, owed $400 million, recently instituted furloughs, and there are fears it may not make payroll in March if the shortfall continues.
‘We’re close to de facto bankruptcy, if not de jure bankruptcy.’
â?? Jim Nowlan, University of IllinoisWithout quick corrective action or a sharp economic upturn, Illinois is headed toward a governmental collapse. At some point, unpaid vendors will stop bidding on state contracts, investors will refuse to buy Illinois bonds and state employees will get paid in scrip, as California did last year.
“The crisis will come when you see state institutions shutting down because they can’t pay their employees,” says David Merriman, head of the economics department at the University of Illinois at Chicago.
[quote]Headhunter wrote:
Illinois close to bankruptcy (in January of this year!)
"As a result, fiscal paralysis is spreading through state government. Unpaid bills to suppliers are piling up. State employees, even legislators, are forced to pay their medical bills upfront because some doctors are tired of waiting to be paid by the state. The University of Illinois, owed $400 million, recently instituted furloughs, and there are fears it may not make payroll in March if the shortfall continues.
‘We’re close to de facto bankruptcy, if not de jure bankruptcy.’
â?? Jim Nowlan, University of IllinoisWithout quick corrective action or a sharp economic upturn, Illinois is headed toward a governmental collapse. At some point, unpaid vendors will stop bidding on state contracts, investors will refuse to buy Illinois bonds and state employees will get paid in scrip, as California did last year.
“The crisis will come when you see state institutions shutting down because they can’t pay their employees,” says David Merriman, head of the economics department at the University of Illinois at Chicago.
My spider senses tell me we will see a bail out soon.
“The folks who say the stimulus hasn’t worked don’t understand the scale of the shock, he said.The crisis was really very deep and the stimulus, monetary, fiscal and rescuing the banks, are what prevented us going back to the Great Depression, back to unemployment rates of 25 percent.”
â??The folks who say the stimulus hasnâ??t worked donâ??t understand the scale of the shock,â?? he said. â??The crisis was really very deep and the stimulus, monetary, fiscal and rescuing the banks, are what prevented us going back to the Great Depression, back to unemployment rates of 25 percent.â??
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I’ve got news for that idiot, our real unemployment is 25%. Yeah let’s “stimulate” the economy more. We are in depression.
Hey you’ve got a 2nd mortgage, go ahead and get a 3rd mortgage, and then spend all of that too. You need more debt to get out of debt? What kind of moron would make a claim like that?\
�¢??The folks who say the stimulus hasn�¢??t worked don�¢??t understand the scale of the shock,�¢?? he said. �¢??The crisis was really very deep and the stimulus, monetary, fiscal and rescuing the banks, are what prevented us going back to the Great Depression, back to unemployment rates of 25 percent.�¢??
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I’ve got news for that idiot, our real unemployment is 25%. Yeah let’s “stimulate” the economy more. We are in depression.
Hey you’ve got a 2nd mortgage, go ahead and get a 3rd mortgage, and then spend all of that too. You need more debt to get out of debt? What kind of moron would make a claim like that?\
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cut unemployment compensation and our high employment would level out.
In my own town, which has been hovering from 5 - 7% unemployment throughout the year, there are many jobs open that people will just not take because of either 1) too prideful or 2) they get paid more NOT to.
case in point: I have seen the same gas station attendant position being advertised for 3 months now. The place I work at, in a “special” home, has an extremely high turnover and I had to work 5 weeks in a row to cover a shift that has been left opened.
so you say 25% for real unemployment. I say more like 5% for “real” unemployment (for those that kinda find any work… what so ever… ) Shit… there is always Labor Ready
" …Say the state can’t make its debt payments, and no one will lend it any more money. In that case, the federal government can step in and put the state into receivership. This would involve the assignment of an accountant to manage the state’s debt, overseen by a judge. It would be a lot like bankruptcy, except instead of following a structured set of steps - informing creditors, appointing creditors’ committees, a 120-day window to file a plan, etc. a receiver has the authority to force creditors to renegotiate loans in a speedy fashion. However, the accountant in charge would not have the power to make decisions about the state’s budget, such as which programs needed to be cut and which taxes had to be raised. (No state has ever gone into receivership.) "
or
" [i]I’m just musing here, but if Illinois was constructed out of a territory in 1818 (becoming the 21st state) on the promise of upholding a state constitution, could that statehood be dissolved and the territory returned to federal control if it fails to meet the obligations of said constitution?
A state can’t go bankrupt, but it could still be a “failed state”. When Afghanistan was deemed a failed state, the larger international community moved in. The legal basis for that might be shaky, but in the case of Illinois, a US territory becomes a US state becomes a US territory. No citizens lose their citizenship or their right to vote. They just lose a state government that had already failed to meet the obligations that defined its statehood.
I’m sure there are a dozen reasons why this can’t be done, but I can’t think of a single one. [/i] "
" I’m a believer that the stock market lows of March 2009 will not be revisited. You have people like Robert Prechter who think the Dow will collapse to 700 because of debt deleveraging. Debt deleveraging could happen, but the Dow will not fall because of monetary policy. The Fed will keep everything inflated in nominal terms. And if the Dow does go to 700, you’ll have more to worry about than your investments. All the banks will be bust. The government will be bust. You don’t want cash if massive deflation happens. On the contrary: It will be worthless. You have to think very carefully about hardcore deflation/"
