i have been working on a new economics system with a new method of generating capital, investment and money supply control. it does not affect current debt obligations. i think it could be answer. do you agree with my summation of the situation and that if my work does provide what i state it could be a way out?
if the interest rate is low there is less of an incentive to save as there is lower return. effectively low interest rates means less saving so interest rates have to rise to increase saving. if they don't the amount saved is not sufficient to lend out to provide investment for new start ups. however if interest rates rise it has a knock on affect to outstanding debt obligations as this is so high it would be catastrophic to the economy repossessions, bankruptcy, business failure on a huge magnitude. therefore the interest rate can't rise. thus no incentive to save and to provide investment. before you say saving is rising. you have to note that lending is not. the only reason saving is rising is because people save in a bank and the bank invests the money, they cannot find good investments so don't lend the money out. but because it is the bank that is supposed to invest the money the individual does not appreciate the risk and thus continues saving unaware of the dangers of investment. one of the reasons banks don't lend out as much is because they can no longer sell on the debt (taking it and the risk associated with it off their portfolio) in credit derivatives. thus the incentive needed for investment cannot be attained with interest with the high level of outstanding debts. the only alternatives are to provide the investment from fiscal stimulus, however this needs to be productive investment (which it is not), or to find a free market alternative that provides a incentive (a return) that does not affect the outstanding debt obligations. does that make sense now.
.............................................................................. Thank you..... But what may be different this time around is the fact that taxes and legal largesse charges could be altered such that asset valuations could get back on the bank books and be for real....while basically liberating the US from its woes..... Firstly...one has to realize a dead end road ....and make the change.... BRIC tax rates are not "extremely" competitive....Labor cost advantages are taken away by them..... Knowing that a dead end road is ahead.....one changes to a form of tax revenue that is broadly distributed ....and will allow for head on price/product competition with BRIC....direct competition,....not protectionism... If one walks into a retail box ....and there are no domestic labels....that money is checking out..... Every time one fuels a vehicle ...the majority of that money is going to a non domestic.... A country cannot do this but for so long....US and GB are finding this out.... Everytime jobs are outsourced....consumers are eliminated.... The future is clear.... If there is no change to a 10/5 C tax.....then this would be the same as forfeiting the future.... Here is what is taught at Harvard.... HOW TO FORFEIT YOUR COUNTRY'S FUTURE.....
Yes of course. I was only speaking to rumors I have read so far. I would rather let you three continue on with the actual debate, I'm not equipped. I would just agree that stimulus needs to provide future earnings and not be used to prop up current mal investment. It is just that rumors have floated a second stimulus may be used to lengthen the safety net, not agreeing with it. Although, we shouldn't lose sight of reserve currency status. There is some wiggle room for waste. It is a much more powerful position to be in.
.................................... If you do not want to state your ideas in the forum....pm me.... ........................................................
Let me get this straight... You're saying the following: 'low base rate' --> 'less saving' --> 'less capital available for investment' Moreover, if I am not mistaken, you're also suggesting that this is what's happening at the moment in the mkts? Is my summary correct?
no it is not that linked to base rate. i wrote the following to the chancellor of the exchequer. "Banks limitations on lending. The aim to get banks lending especially to small businesses to the degree necessary to create economic recovery is unlikely to be achieved. The credit market is not the same as it was before the credit crunch and will not be the same again in the future. The reason banks were able to provide so much credit and at such low rates prior to the credit crunch was in effect what led to the credit crunch in the first place. The high availability of credit was down to the banks selling on the debt to other investors passing the risk on as they no longer held the debt on their own portfolios. The credit crunch occurred when investors stopped buying this debt, which was an amalgamation of debt products made up of different risk levels concealed in a credit derivative, this meant that as the banks could no longer sell on the debt which previously eliminated their risk. This resulted in banks having to hold more of the debt than they did when investors were purchasing the credit derivatives, which in turn increased the overall risk of their portfolios. As the banks now have a higher risk element associated to the debt they have to receive a higher return to compensate for the potential loses the increased risk creates. In short although the base rate of interest is very low the interest rate in practice at banks has to stay high to compensate for the higher risk level they hold. Also it is important to point out that the base rate of interest does not have to be followed by banks unless they are CAT standard mortgages (in which case they have to be within two percent of the base rate) or directly follow the base rate. The unfortunate reality of the situation is that due to the economic climate on top of the explanation provided above the risk of investing is substantially higher than before the credit market constraint. The deeper aspect of this situation is that it is becoming increasingly difficult to find an investment that can provide profits with reasonable risk or a return that justifies that risk. This would be seen in the individual market if people did not save money in banks, they would find it difficult to invest safely in the current conditions. Because people save money in banks the bank acts as an agent for the individual to invest the money they saved on their behalf. The banks are now in the dilemma the individual would have been in if they had to invest the money themselves, which is there is a limited supply good investments. People continue to save (and in fact the saving rate is increasing) but the investment is not carried on to businesses as the responsibility of investing has been passed on to the banks. In short the only reason why individual saving is increasing is because the individual passes on the responsibility of investing the money to the banks, who cannot invest the money safely. Due to this passing on of responsibility it is difficult to see why the banks are not increasing their lending even though they have more money at their disposal to lend out. It is however as a result of lack of demand of credit derivatives, tougher economic outlook and the bank acting as an agent on the behalf of individuals. The only solution to the problem is to eliminate the risk to enable the same level of lending seen before the credit market constraint. However due to the manner in which the reduced risk was achieved in the pre credit crunch period (when bad debts were bundled up with reasonable debts and concealed to make them seem less dangerous in a credit derivative) it is not possible to return to those credit market conditions. Also even with those products the credit crunch occurred when investors stopped purchasing the credit derivatives showing the lack of interest in such a product. " it is a bit more complicated than this too but it is just a brief. i wrote another paper but is much longer. if this doesn't explain it i could forward you that paper. but i think this will suffice.
Maybe religious unrest is part of the problem but really, we have had that every generation since Jesus was born... I'm seeing the main vector in the entire dilemma is that the "Harvard Brats" that are leading the nation are Atheists... without absolute morality there isn't much morality at all... look at a jail for example... it's full of people without absolute moral guidelines so what is punishable in a jail? Molestation, probably because it's the only crime a lot of those guys have not done themselves.... So what is punishable in the eyes of a Harvard Grad?? Not being a Marxist maybe? Reading a Bible maybe...
although large religious unrest has been around for a long time nuclear bombs and c4 haven't. plus the media coverage extends the problem. a small problem can become a big one if people let it.
There was plenty of stimulus. It was just mis-appropriated. Rushing those huge sums to the banks without any guarantees they would use it to create jobs or lend to consumers ( which they of course haven't done) was a massive miscalculation.