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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Hawkmoon who wrote (104779)9/2/2009 9:38:42 PM
From: Elroy Jetson  Read Replies (1) of 110194
 
Interest paid is income to someone else. But when you're a debtor nation that payment is most often made to someone outside of your economy. Likewise a bankruptcy is a loss outside of your economy.

The simple fact is no economy has escaped excess debt through any means other than bankruptcy and liquidation.

-- Some have tried to inflate their debts away and all have failed.
-- Others have tried to grow their way out of excess debt and have failed - unless they're a small nation with a new large oil discovery.

America is in for a lot of foreclosures and bankruptcies. This can be postponed but not avoided. The UK will experience an even higher level of bankruptcies and foreclosures.

Even within the same economy, what happens with debt liquidation is this: Wealthy people who are owed debt lose some of their wealth and work hard to make it back, making the economy very productive. Debtors are very unlikely to find any way to pay back their debt, or even sustain it. But after they're out of debtor's prison they can spend all of their income.

When an economy becomes debt-laden, the wealth becomes concentrated in the hands of a small wealth minority. An economic depression and bankruptcies, or an invasion by a neighboring city state reduces the concentration of wealth and leads to a new era of prosperity and the wealthy once again end up with most of the wealth.

We have evidence that people have been this way even as far back as the 1200's in Italy.
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