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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (104778)	9/2/2009 9:04:08 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 110194

Spending on infrastructure projects merely provide paychecks while the project is going on. If debt is not being liquidated while this project spending is happening there is no progress out of the economic depression, merely a temporary reprieve. Presumably, if people are making their payments and paying down their credit cards, the money spent on their paychecks will mitigate the severity of the debt collapse. One has to assume that the majority of US consumer debt is not tied up in buying toys and clothes. Rather, it has been tied up in over-priced homes, and vehicles. And many of these people purchased their homes 10-20 years ago, long before our recent real estate bubble. If they lose their jobs, they wind up defaulting, or engaging in a forced sale (and now have to rent), just as easily as those who took out liar loans and purchased $500K homes on a minimum wage income. Either way, the gov't will be forced to pay out money to take care of these people doing absolutely nothing productive. What I understand is private and public market failure. There are just certain things that only the government has the resources to bring to bear to a particular technology. The internet is probably the most important example of that, as well as the space and aviation industry. The liquidation of excess debt instantly frees up vast amounts of income available for investment and spending. In what way? Interest paid is interest earned. That's INCOME THAT IS LOST TO SOMEONE. If I have purchased $1 million worth of mortgage debt and the borrower defaults, how will that free up my capital? I get stuck with the house and have to sell it, probably incurring costs to maintain and renovate it prior to doing so. If I have purchased corporate debt and they default, how does that increase my investment potential? The corporation goes into B/K and the bond holders get stuck with equity and the responsibility of turning the ship around. I'll be interested in hearing how wiping out debt and the interest that is paid to the holder of that debt, increases their investment potential. I would suggest that in CERTAIN cases, and under specific circumstances, B/K is a good thing for those who undergo it. But certainly not in general. Dealing with the underlying debt problem should be driven from payment side, by keeping people PRODUCTIVELY EMPLOYED. Hawk