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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (17495)	2/9/2009 7:44:31 PM
From: carranza2	Read Replies (2) \| Respond to of 71456

Jesse, again. The man is brilliant: And yet we do little or nothing of substance to advance the objective of our cure, save some rather expensive and fruitless gestures, an enormous beneficence for the perpetrators, and bread and circuses for the mob. jessescrossroadscafe.blogspot.com A Simple But Incontrovertible Truth About Debt, Deleveraging and Recovery It is incomprehensible that any informed economist does not understand this difference between deflationary deleveraging and a cyclical recession. And if they do, how could they possibly justify giving trillions of capital to the banks to support them in their excess so that they 'might lend once again,' when it was their reckless lending and speculation that brought us to this point? And the economists also know full well that the real cure lies in devaluing the currency and restoring the balance sheet of the individual households through an increase in the median wage and the debt relief of bankruptcy. And there must be reform, a change in the system that spawned these repeated bubbles and epoch malinvestment. And yet we do little or nothing of substance to advance the objective of our cure, save some rather expensive and fruitless gestures, an enormous beneficence for the perpetrators, and bread and circuses for the mob. "Basically what happens is that after a period of time, economies go through a long-term debt cycle -- a dynamic that is self-reinforcing, in which people finance their spending by borrowing and debts rise relative to incomes and, more accurately, debt-service payments rise relative to incomes. At cycle peaks, assets are bought on leverage at high-enough prices that the cash flows they produce aren't adequate to service the debt. The incomes aren't adequate to service the debt. Then begins the reversal process, and that becomes self-reinforcing, too. In the simplest sense, the country reaches the point when it needs a debt restructuring. General Motors is a metaphor for the United States. The process of bankruptcy or restructuring is necessary to its viability. One way or another, General Motors has to be restructured so that it is a self-sustaining, economically viable entity that people want to lend to again. This has happened in Latin America regularly. Emerging countries default, and then restructure. It is an essential process to get them economically healthy. We will go through a giant debt-restructuring, because we either have to bring debt-service payments down so they are low relative to incomes -- the cash flows that are being produced to service them -- or we are going to have to raise incomes by printing a lot of money. It isn't complicated. It is the same as all bankruptcies, but when it happens pervasively to a country, and the country has a lot of foreign debt denominated in its own currency, it is preferable to print money and devalue."