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

To: mishedlo who wrote (101069)	8/20/2009 3:25:59 PM
From: Amark$p	1 Recommendation Read Replies (1) \| Respond to of 116555

Mish: "The answer is the Fed has no power to give away money to consumers, and even IF they had that power they would not do it. The reason is people would pay off their loans and banks do not want to be paid back with cheaper dollars. The Fed will not act against its own best interests, and giving money to consumers would be doing just that. That is a practical constraint that nearly everyone misses! Indeed, look who was bailed out, it sure was not consumers, it was banks at consumer expense." ______ The only way the US can decrease its Debt to GDP ratio quickly is for the banks to be paid back with cheaper dollars. It's a matter of when not if. The US Govt first bails out the banks and then bails out the consumers. Rather than experience a "lost decade" of deflationary spiral, the US Govt only option is to ensure the banks are paid back with cheaper dollars. Once most of the debt has been sufficiently cleared, then the system resets and banks will loan and consumers will borrow. What is inaccurate with these comments...? _____ The US will have deflation and unemployment in the short term. I agree with most ALL your comments in the short term. But there can be riots on the streets (or other factors) and current politicians/Fed officials can be voted out of office so that banks are effectively paid back with cheaper dollars. The US Govt will not and cannot accept a "lost decade" of deflationary spiral.

To: mishedlo who wrote (101069)	8/20/2009 8:06:40 PM
From: axial	1 Recommendation Respond to of 116555

Mish, agree: the idea that consumers will get us out of this recession any time soon is preposterous. Also agree that many people are arguing nonsensical economic definitions. Regardless of individual problems (crony capitalism, casino capitalism, excessive global debt, derivatives, excessive leveraging, financial corruption, law-breaking by Wall Street, regulators and legislators and so on ad nauseum) overall, it seems clear that the system is broke, and that present "repairs" will prove inadequate. We watched and tut-tutted as communism failed; in not too much time capitalism and fiat money will follow, IMO. Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong -snip- "This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal 'print and trickle down' approach ... Until the median wage improves relative to the cost of living, there will be no recovery. And by cost of living we do not mean the chimerical US Consumer Price Index." jessescrossroadscafe.blogspot.com Jim