Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Elroy Jetson who wrote (104783)	9/2/2009 10:41:52 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 110194

When an economy becomes debt-laden, the wealth becomes concentrated in the hands of a small wealth minority. Excuse me.. are you saying that all of those Americans who were putting money into IRAs (bonds, stocks, and real estate) were a "small wealth minority"? And right now, due to how the private banking sector MISAPPROPRIATED their depositor money by making excessively risky loans to people who can't afford them, investors are fleeing to the "safety" of Government T-bills. In fact, the government has become the primary borrower because the private lending industry has lost its credibility and extended risky loans to unqualified borrowers. It's one of the biggest reasons for having a stimulus package because the government can invest excess capital when the private sector has lost it's capacity to do so. With trillions of dollars on the sidelines lacking a credible investment alternative, they invest in government debt. That's why T-bill interest rates are still incredibly low. Unfortunately, this administration (and the previous one) chose to spend that money on salvaging the "supply side" of the financial sector, rather than insuring that the demand side was able to continue to finance it's existing debt through wages earned in productive employment. Every economy is a balancing act. We need a combination of mild inflation to motivate people to buy now rather than waiting for future discounts. But we also need productivity gains in order to bring down the cost of production and keep prices reasonable (and profits higher). And btw, with regard to incurring debt in order to borrow from our futures, isn't that the entire premise of the mortgage markets? Few people can afford to pay cash for their own home outright so they take on 30 year mortgages. Real Estate is a huge part of this economy's money supply as every dollar borrowed is integrated into other financial transactions. So we can't just wipe all the RE debt off the books and "unleash investment". And all that foreclosures do is to transfer real property from the majority into the hands of the wealthy minority, who then turn around and rent it back to the majority. No.. reasonable debt loads are not negative and they serve a useful purchase when they involve real property that creates equity. That's called an investment. What IS a problem is debt accrued to purchase depreciating assets (cars, clothes, furniture.. etc). And right now that seems to be just about everything, including real estate. And the only way to address depreciating asset prices is to work through the demand side of the equation. Hawk