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speedybure (< 20)

WHY A RECOVERY WOULD ACTUALLY BE WORSE.....

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April 13, 2009 – Comments (2)


I agree that everyone would be happy and cheerful thinking we've printed our way back to the artifical economy we are used to. Here is my reasoning:  

 

 

   1) In order to get back to the bubble economy we all love when its booming and grow to hate during the bust, blaming the free market and capitalism, the consumer needs to spends (obviously). But all this would lead to even larger missallocations of capital. This artificial low rate for loanable funds would be invested in higher order goods (tech spending, innovative alternative energy spending, the next ipod etc). But artificially low rates distort those borrows in terms of where they allocate capital. Additionally people would go back to using innordinate amounts of consumer credit (credit cards) and there would likely be a craze to buy real estate again. The average joe is thinking "we may never see these prices again" and they may be true at least in nominal terms. So why would this be worse?? As you all know federal reserve has been increasing the money supply at an exponential rate since last october, not to mention all the money pumped into the system since the bursting of the tech bubble. So there are two scenarios possible (even the fed said they will need to contract the money supply eventually, though i doubt they will). 

: The fed does a 180 in terms of manipulating the money supply. They go back to the volcker style era, letting the prime rate float. Rates reached 20% back in the 70's and given our situation rates would probably be much much higher. This would not only send the economy into a deep recession again, but all those who borrowed and spent when the prime rate was 0%, are very likely to default on loans and credit, while those who invested what they borrowed will have invested to deep in the capital structure or in the best case scenario have already reached final output,  but the tendency for consumers would be to save and only spend on basic goods, thus. In other words, the major banks would be even worse shape than their currenct condition. Then we would start over and repeat the same monetary and fiscal policy in the currenct crisis. The next time around would involve increasing the money supply again, then the cycle would start over. This is exactly was happened with the asignot in pre-revolutionary france. Think of it as taking heroin, you need a bigger and bigger dose to feel the same effect (though i don't do it, i assume thats how it works). 

 we continue down the current path, but maybe the fed will eventually realize the consequences of their actions, or the chinese, japanese and all other creditors want to redeem their debt. This would most defintely cause the fed to stop running the printing press 24/7.

  WE NEED TO STOP PRINTING MONEY BECAUSE IT IS DESTORYING EVERYONES REAL WEALTH, WE NEED TO SAVE NOT SPEND OUT WAY OUT OF A RECESSION, ETC   

2 Comments – Post Your Own

#1) On April 13, 2009 at 6:31 PM, lenri (70.94) wrote:

No argument here. I think in 3 or 4 years we are going back into recession just like in the early 80's. Inflation is definitely coming. But history repeats itself and that inflation will eventually be brought under control again. In the meantime as long as you and the populace are not blindly loyal to a set of "new" economic ideals (Keynesian comes into mind here) we should be fine. There is money to be made in any economy. It just won't be as easy as in the past.

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#2) On April 15, 2009 at 4:25 AM, KamranatUCLA (29.20) wrote:

Obama has only one solution to do that can solve everything at once. before I give you this magic portion, here is a side story.

100 people go to live in an island , their population doubles in 10 years and their food sources are cut in half....this goes on for a while until there is just few food and 1000 people. so it continues,,,

So everybody stars to fight for the food 100 survive and they eat all the food. So now e have 100 people with no food.

A Persian saying says: where there is a way, there is a god, where there is god, there is a solution.

So this is the solution. 100 shoud eat eachother and use some of to feed chick and stuff fo they have food again.

Now I translate this to our sitution here in the U.S. Stock issuers and stock buyers are in the same island. They are fighting over the last remanings of boob time. next we have to let them eat eachother,...to make them 1 unit.

What I am proposing is highly philosophic in theory but too simple naturally. Issuers and borrower have to be come 1 entity.

So you ask What??? OK i AM ON SOMES SLEEPING PILL, BUT I GET MY BEST IDEAS WHEN I TAKE MY SLEEPING PILLS.

so we have to make the bank and the people the same...how do we do that we need to get 1 entity out of 2 entities,,,

So lets think about it step by step. If a person want to be a bank and a bank wants to be a person what should thse guys do.

SO let back to their fuctionality, Can we assume if 1 entity would be the bank (issuer) and the debitor that the bank needs to loan and the buyer needs to buy the laon?

so the product of these thnigs ill be a new thing but it will be 1 unit...like a one bank.

Hahaha this is genious and I should win the Noble price for this: ready???this is my financial solution for the U.S for the next 300 year. People would be their own bank,

Makes absolutle perfect sense. We can make this perfect, TRANSPARENT bank on line. All owner of the bank are all also the customers of the bank....everyone with equal shares ordenomination of these shares

This ca easily be down with a computer software where you put your money in and 100% of people in bank vote if you shoud get that money or what you want to with gets apparoved. So now as a debitor you have to work about the other side of business wich is really good because if we don't they get a CEO who does i for millions dollors more and we all lose....i think it's a good 21century idea...what do you peole think?? 

 

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