The Current US Economic Problem

Discussion in 'Economics' started by libertad, Nov 5, 2008.

  1. US with leverage/savings means....

    Prices can reach levels to reflect credit/savings utilized....

    If the average amount of credit/savings utilized for a house,car,
    credit card items was $250,000......

    And now has become $100,000......

    Then just how is it that government policies can affect
    change such that the $150,000 decline in money
    available can be made available again ?

    And this has to be through true productivity......


    ...........................................................................

    Thus under what circumstances can the near term issue not be deflation.....and in a big way ?
     
  2. Daal

    Daal

    the current US economic problem according to SA is a 'lula deficiency syndrome' :p
     
  3. jjf

    jjf

    It is deflation, dressed up to look like something else.
    Throw in rising household expenses and you have stagflation, but of course I will deny that if you ask me in public.

    This will remain the course whilst the banks reload.

    The interesting time will come when banks open their doors again to borrowers.

    Will an orgy of catchup spending trigger inflation or will the consumer take a different path this time and thereby trigger a different outcome.
     
  4. Banks are not going to make loans on falling asset valuations....

    It does not matter if it is a house or business.....

    Thus the money being plowed into banks is going to remedy what ?
     
  5. jjf

    jjf

    It is reloading the balance sheets in preparation for the next round of sensible loans to be extended once assets reach their base.

    Remember that the banks control the base as much as any other factor(s)

    The unknown factor is whether the consumer comes out to play when invited.

    If you live in UK/Europe then forget it.

    If you live in US who knows. Once people get a whiff of life without trinkets it can be difficult to find the correct cheese to lure them out.

    Certainly the Japanese have never found it.
     
  6. And what is interesting about the Japanese.....

    They have a huge segment of the population who have never had their savings rewarded by any significant interest payments....

    Thus what are actuarials going to begin to use in their models ?
    And how about the massive increase of capital needed to pay the same income stream ?

    It is a given that the US becomes a new Japan.....and has a higher probability of being something worse....because of low savings....

    Paying no interest for labor is like dropping a nuclear bomb on retirees....What are they going to do ?

    Even today...the Japanese Central Bank meets to discuss big changes in their interest rate picture...you know ...a big change of a possible 20 basis move.....

    What is even more interesting is that if rates are moved high enough to reward labor....All of the debt holders at the low rates get crushed.....

    Just check out what happens to a long term bond when it moves from a par 2% versus a par 7%.....

    Thus equity....and what I have suggested earlier about a new world wide exchange....along with accompanying information....is one of the very few options to replace money......because stock at least has a chance to make big gains.......

    Very low rates are a very tough item to change when allowed to stay for too long.....