You are saying, govt wont allow people to easily get off the loan - but it will want people to take loan?
Sure seems they want to make a debtor class doesn't it - what did rothbard and schumpeter say?
Message 22379368
Banks will go after the guys who have taken the loan.
Chromatic says the banks have a powerful lobby with the gubbment - but in the end - you get too many pissed off voters and they become the ultimate powerhouse throwing lifelong politicians out of thier cushy jobs.
So every guy in the business will expect the same and hence not take new loan
I dont think speculative investor going to take on many new loans for 4th bubble condo purchase - but some guy just ask patron and loantech where he can get loan for a house in arizona - so people still taking on loans.
- no new credit created - banks go under.
No - everything I have read BANKS went under because that was policy of the day - policy that is no longer practiced - japanese banks did not go under - they are still working with bad loans - now in hoovers day historians said if ben Strong had not died - things would have not gotten as bad - Mellon had this to say:
econlib.org
Andrew Mellon, Treasury secretary under President Herbert Hoover, said after the depression started. "Enterprising people will pick up the wrecks from less competent people," he claimed. One exception to the hands-off attitude was the Federal Reserve, created in 1913. It was charged with the responsibility for providing emergency funds to banks so that surprise withdrawals would not trigger bank runs and a financial panic.
hoover.archives.gov
Boom and Bust
1932-52D: Lou Henry Hoover distributes Christmas presents to needy families at the Central Union Mission, Washington, DC, December 23, 1932. (Acme)
For most of our history Americans have been resigned to the "boom and bust" school of economics. When the economy got overheated and speculation ran rampant, a crash was unavoidable. Under such circumstances the best government could do was to do nothing that might make a bad thing worse. "Panics" had occurred in the 1830's under President Martin Van Buren, in the 1850s under James Buchanan, during Ulysses Grant's term in the 1870s and, most notably, under Grover Cleveland in the 1890s.
None of these presidents did much to stem the deflation in prices, contraction of investment, and loss of jobs that resulted--for the simple reason that standard economic theory held there was little if anything they could do. Then, in 1921, a post war slump led President Warren Harding to name Hoover as chairman of a special conference to deal with unemployment. "There is no economic failure so terrible in its import," Hoover declared at the time, "as that of a country possessing a surplus of every necessity of life in which numbers...willing and anxious to work are deprived of dire necessities. It simply cannot be if our moral and economic system is to survive.
This view explains President Hoover's vigorous counterattack in the wake of Wall Street's initial tumble. Not all of his advisers were so willing to abandon Boom and Bust theories. As late as 1930, Secretary of the Treasury Andrew Mellon held that a panic might not be such a bad thing. "It will purge the rottenness out of the system," he added. "High costs of living...will come down. People will work harder, live a moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people." Mellon lost out, however, and was packed off to the Court of Saint James.
what are you saying: Govt will be lenient or not?
You try to paint 250 million people here and 7 billion worldwide with one stroke of the brush bondbubble - you cant do that - the world does not exist in such absolutes. Elroy may get his 80% price cut in one house in one neighborhood at ground zero in bubble california - that does not mean much to me though looking at the broad forest.
If you say, middle ground, can you spell it for me? I can not imagine what a middle ground is.
If all you can see is black and white and not the millions of colors inbetween - you live in a world of too many absolutes - it just doesn break down like you want it too - yes or no - on or off - 1 or 0, not by a longshot. I will give you example - my cuban neighbor in west palm beach - he could go to the bank and get a big loan many years ago - I could not - you know what the difference was? The loan officer was friends with him in the cuban american club and they both came from cuba - I did not come from Cuba - there is your middle ground.
Also, I understand that banks dont go under for the following reason: The banks pass too much bad loans to Fed.
S&L of the 80's did not crash the world, LTCM did not crash the world - we all still here trucking eh?
Banks go under because they can NOT create new loans and hence maintain the business
You know I used to see full service gas stations and woolworths everywhere - now I don't see them hardly anywhere - if banks run out of people to borrow - the will merge and contract and change - notice how so many want to keep walmart out of the banking business recently.
... Let's say Fed takes 300% of banks reserve as bad loans ... that seems to be a good start, doesnt it? so aggressive lenders will fail for sure?
The world is ending bondbubble - buy puts on XLF and short it into oblivion - go get a heloc on your house and use the proceeds to buy more puts on XLF - you are bound to become a billionaire in no time flat with such a concentrated (all eggs in one basket) strategy. |
