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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: JohnG who wrote (89001)10/24/2008 6:30:53 AM
From: Dan33 Recommendations  Read Replies (3) of 116555
 
Re: Roubini Sees possible shutdown.

Sooner or later, some people who are capable of doing 4th grade arithmetic will get into office (maybe Obama is capable of doing "sums").

The issue is that during the past 8 years real incomes for citizens in 90% of the western economies fell, while world population rose.

Money is an abstraction for available goods and services. There was an expansion of the aggregate money supply, but it was diverted to a handful of politically connected people working in the corporate management and financial sectors.

The economy rolled along for a while as the lucky 10% lent their winnings to the remaining 90%. The 90% have now borrowed more than they'll ever be able to pay back, and have (in many cases) begun defaulting.

The current plans all call for giving even more money to lucky 10% to loan to the remaining 90%. "It's just a liquidity crisis."

It is not a liquidity crisis, it's a debt and solvency crisis and the way to solve it is to divert some wealth and earnings away from the 10%, who already each have a dozen cars, 3 or 4 homes, etc. to the remaining 90%, who can't afford the 1 home and 2 cars they have now.

Think about where the economy would be today if we'd given that $700 million that was handed to Goldman Sachs as additional stimulus rebates, instead. Remember that even a $150 million rebate to the debtors brought the economy back into growth for the quarter during which it took place, while giving $700 million to the already rich caused that money to simply vanish.
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