BUBBLECONOMICS is the problem. Face it!!!!

Discussion in 'Economics' started by jueco2005, Feb 26, 2009.

  1. It is not Keynes anymore, not any other type of economic approach or idea.
    Effectively since 1971 "credit" became the main form of money in circulation (check money aggregates).
    We live in an era of Bubbles, due to constant asset price inflation, fiscal deficits, trade deficits.
    Because this time they pushed it over the limit, does not mean things will change.
    Learn and discuss how this bubbleconomics works.................YOU WILL SEE MORE OF IT.
  2. tradersboredom

    tradersboredom Guest

    money or cash is just receipts of ownership of goods and services produced in the economy.

    therefore the money supply must = GDP

  3. I did not get your point

    However, Real GDP is not GDP.
    Also Economic development is more important than increases in Real GDP (even more than just GDP).

  4. the1


    All you have to do is look at the massive and reckless expansion of the money supply starting in 1995. Compare this to the SPX and you'll easily figure out what caused "the greatest economic expansion in US history." It was purely manufacturered by the Federal Reserve. Is it any wonder why we are where we are today? Graph attached.

  5. Your graph also shows how M3 went from 20% of the money supply in 1995 to over 40% of the same in 2007.

  6. since all of our money is created through bank credit The ponzi sceme has to fail

    lets say an economy has 1 million in total money supply. now the banks lend out 10 million on the 1 million in there banks. So that brings the total money supply to 11 million.

    How does 10 million in loans PLUS INTEREST

    The banks didn't create the extra money for the interest
  7. sorry i hit post by mistake

    depending on terms and conditions of the loans, the money that has to be repaid is a lot more then was created.

    for this exercise lets say that they are all long term loans (30 year mortgages)At the end of maturity the banks well get the 10 mill in principle and another 20 mill in interest.

    remember are pool fo money is only 11 mill. so no matter how hard you work or how smart you are 2/3 of the loans are going into default. the money supply is not there to make everybody whole.

    so 2/3 of the loans will have to get new loans to cover the bad. and guess what that money is created the same way. which leads to a bigger gap. between money supply and loaned money. It's an exponential system that will keep going until it implodes

    so we have keep creating bubble to hold it up. or change the way or money supply is created
  8. yes, this mathematical dilemma relies on the ever-expansion of debt to continue, or massive deflation and negative interest rates to come to conclusion.

    the latter is unlikely, as it would mean all debt is eventually paid off which would mean money supply goes to $0 and we'll be broke.
  9. yup , that sums it up inflate or go busto
  10. +1
    #10     Feb 27, 2009