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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (100821)	8/14/2009 1:34:12 AM
From: Proud Deplorable	1 Recommendation Read Replies (1) \| Respond to of 116555

RBS Chief Credit Strategist: Markets Have Priced in a V-Shape Recovery ... Markets Will Crash When Data Shows That Type of Recovery Isn't Happening washingtonsblog.com

To: mishedlo who wrote (100821)	8/14/2009 8:34:53 AM
From: Rocket Red	Respond to of 116555

okay so the 11 trillion sitting on the sidelines is all fictional too???

To: mishedlo who wrote (100821)	8/14/2009 10:01:59 AM
From: philv	1 Recommendation Read Replies (1) \| Respond to of 116555

"There is a difference between money and debt." Lately there have been many articles about debt and money, and if there is a difference between the two, its very slight in that its a temporary creation of money. Temporary because its supposed to be paid back. You have seen charts of total debt (not just governmental) and if you look at the trend, it has almost never gone down and lately it has been exploding. If debt never goes down, the money stays in circulation as it isn't returned back to the lender who created it out of thin air. Besides, they don't want it back, they want the interest payments. The economy exists because of debt. Even what you call money is created out of debt. The government doesn't have any "money", yet can issue treasury bonds which the FED buys by magically creating "money" which it gives to the government to spend. The new money is put on the books as government debt. If there is a difference between debt and money, you would need a magnifying glass to see it. Its for this reason some people argue for real money which can't be printed into existence, like gold. Is there a difference between money created by government debt and money created by other debt? Both result in money expansion and inflation. I agree we are in a severe deflationary period. You have won that debate long ago. The solution to deflation is inflation, which our masters are trying to accomplish using every trick in the book. Zero interest rates to get people to take on even more debt, get money flowing into the economy, delaying payments so that default isn't declared, and outright money printing and trillions of dollars in stimulus. I know your argument is that all of that will not work, and it will be interesting to see what transpires in the future. Enjoy reading this thread and your blog Mish.

To: mishedlo who wrote (100821)	8/14/2009 10:04:38 AM
From: skinowski	2 Recommendations Read Replies (3) \| Respond to of 116555

for every dollar in defaults, banks need to raise 10-100 dollars from somewhere (depending on leverage) to remain well capitalized. So, the government went ahead and borrowed astronomic amounts of money backed by future tax revenues, and gave that money to banks. All that was accomplished is to allow banks to keep their doors open. The entire bailout did absolutely nothing to help the underlying problem, which is, of course, individuals and companies being too deep in debt during an economic slowdown. In other words, if there would be no bailout many banks would close. FDIC would pay off depositors an amount which would be only a small fraction of what was paid to make banks whole. Bondholders would lose money. Other than that, down on Main street, people would still have to deal with high debt and slow business, everything would remain roughly the same - but the government would not have blown a huge wad of money they didn't have. Question -- I may be missing something, but still, If a regular non-economist person like myself can grasp this, how come high flying economists and presidential advisors DO NOT??

To: mishedlo who wrote (100821)	9/3/2009 6:33:50 PM
From: Amark$p	Respond to of 116555

Here is chapter from Steve Keen new book on money creation. debtdeflation.com

To: mishedlo who wrote (100821)	9/4/2009 2:19:18 AM
From: Hawkmoon	Respond to of 116555

The Supplier buys $500,000 in supplies from a wholesaler who deposits the $500,000 into a bank and that bank lends it out to someone starting a pizza business and so on and so forth forever. But guess what Mish, those banks aren't lending that money out anymore (except to the Government via T-Bills).. And besides, that $500K doesn't all get deposited in some bank unless that homebuilder is stealing all of his supplies and stiffing his sub-contractors. If I borrow $500k, pay it to the homebuilders, who pay off their credit lines at the lumber store for the materials they purchased, pay their payroll, and pocket their profit (if any) for their own wages. That profit is either spent or saved. But if they are like most contractors I know, their profits are pretty damn slender so most of it gets spent paying for their monthly bills. And btw, the lumber yard then orders more materials to sell to someone else, pays their payroll, and deposits or invests their profit, and so on and so on. In sum, the speed of which those transactions ripple through the economy is monetary velocity. Your scenario, IMO, only works if that $500K is ALL deposited by the various people I have paid for their services, and then it should only amount to a total of $5 Million (10-12x reserve requirements), not $50 Million. Much of that credit on the books is worthless. Banks know it and you know it and so do I, but the Fed and the banks pretend otherwise. It's only worthless if the borrowers stop making their payments. That's why I have some issues with mark to market. For example, if I have a house appraised at $200K and I pay my mortgage every month, and the guy next door, living in an essentially identical house, short sales his house for $150K, (according to mark to market) my house is suddenly only worth $150K. Even worse would be if he was foreclosed on and the house sold for $100K. According to M2M accounting, all similar loans outstanding in that region or borrower qualification should be marked down as well. That means the banks are forced to write down my mortgage to market standards, EVEN THOUGH I've never missed a payment and might have sufficient funds to pay it off sitting in savings (but desire the mortgage interest deduction.. ;0) Mark to market is very subjective and does not take into account any difference between a defaulted mortgage loan or one that has had no payment issues. It's "voodoo accounting".. I can see the efficacy of it for short term investments like stocks, but for long-term debt, it's rather austere and creates instability in a banks capital status since the value of those mortgage loans might vary 10-20% depending on the short-term economic outlook. Hawk