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

To: arun gera who wrote (101123)	8/21/2009 3:13:52 AM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

When you're a debtor nation which liquidates your consumer and business debts in bankruptcy, the hangover (those with lower incomes and fewer assets due to the failure of the debt to be repaid) resides primarily in the nations who lent you the money. .

To: arun gera who wrote (101123)	8/21/2009 6:56:29 AM
From: THE ANT	Respond to of 116555

That is what I have been saying.The debt/GDP ratio made the asset/wage ratio rise as assets got more valuable.People thought they could retire as their assets would buy a certain level of services.Those same assets now buy a much lower amount of service and this will decline further.Wages may fall but not as much as assets.We are going back to the old asset/wage ratio that existed prior to the debt/GDP bubble.Inflation can raise both assets and wages but not raise the ratio(I will argue that inflation will actually make the asset/wage ratio fall).Only a increase in debt/GDP can inflate assets without inflating wages and even this can not be done in an enviroment where people know any such increase is unsustainable.Game Over!

To: arun gera who wrote (101123)	8/21/2009 10:50:38 AM
From: Maurice Winn	4 Recommendations Read Replies (1) \| Respond to of 116555

There won't be increased spending or consumption, because each dollar that the debtor no longer pays to the creditor but spends instead, is a dollar that the creditor no longer receives and therefore does NOT spend it: <they will chastened, to be sure, but their income which previously went to pay for debt service is now available for consumption.> Elroy seems to have missed the chain of events. The question is one of who gets to do the spending. When things were going well, the creditors were being paid interest, the government taxed it and the creditor went shopping. With bankruptcy, the creditors no longer receive money, the government no longer receives tax, the debtor can spend their income on something else. The type of spending will change. When things are going well, it's party time, with jetaway vacations to exotic locations, nice hotels, swanky cars, discussions about which is the best wine, government coffers are full of tax, profligacy abounds. When things are going badly, bankruptcy courts and lawyers have fun and go shopping, governments print money to make up their tax short fall, creditors don't pay tax but have no income either, wastrel spending declines, the party-time hangover is on, retrenchment to garden variety activities is the order of the day. When things go worse, somebody says "Hey, it's [fill in xenophobic, jingoistic target]'s fault. Let's put on uniforms, march and sing and get them". A "strong" man will be pushed to the fore. Already, people are vilifying our great and glorious financial maestro Alan Greenspan KBE but all he did was try to keep the money supply on the more or less straight and narrow with inflation not too bad. Mindless Zombies who lacked self-control thought they could borrow their way to wealth through speculative capital gains. Warning here 7 years ago: Subject 53236 The banks and "Wall Street" are also considered to be evil-doers. Mel Gibson is no doubt muttering that it's the Jews. Of course if the Chinese hadn't manipulated their yuan, things would have been fine. The Russians of course have no right to fail to deliver "our" gas at the price we want to pay. Not to mention OPEC and the oil companies charging too much for "our" oil. Neelie says Qualcomm, Intel, Microsoft are charging too much money so have to give her $billions. Plus ca change, Mqurice