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Frontrunning: March 4
- There is no bubble: China punishes 7 banks for loans misused on stocks (Reuters)
- Oh look - consequences: Greek demonstrators took over the
Finance Ministry building in central Athens and blocked streets
in the city center (Bloomberg) - Economist - Now comes the pain (Greece)
- Even as ECB says Greece will need further measures: What next - mandatory selling of citizens' kidneys for debt reduction (Reuters)
- Traders seek out next Greece in an ailing Europe (NYT)
- Even as German MPs demonstrate a rare sense of humor - "Greece could sell islands to cut debt" (Reuters)
- Greece offers extra interest on new 10-year bond sale (Bloomberg)
- ECB keeps rates at 1%, weighs PIIGS (Bloomberg, WSJ)
- BOE Holds Bond Purchase Program at 200 Billion Pounds (Bloomberg)
- Inflation hawks should stand down (WSJ)
- Productivity in US climbed 6.9% in fourth quarter as costs fell (Bloomberg)
- Goldman leads slumping M&A market as Buffett deal boosts hopes (Bloomberg)
- ‘Volcker Rule’ Draft Signals Obama Wants to Ease Market Impact (Bloomberg)
- Pento:Is the dollar really safer than the euro (IBTimes)
- Swap vigilantes take heat for euro shortcomings (Bloomberg)
»
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That look like Iran after the elections! Lol
Consequences. Sorry Tyler you are not even close to seeing the consequences of humans deciding to use compounding interest as the base of their financial system.
The consequences for yours and 99.99% of the world's population will be in the billions this time instead of the 100 million that was the 1930-1940s.
I love these articles that show how the Greece is responsible for these consequences but the rest of you guys that have been supporting the system that is doomed to fail think you are going to be spared.
The consequences haven't even begun yet, that is when the tanks start rolling.
If they started arresting everyone that is responsible, there would be nobody left to lock the prision door. All the humans on this planet are responsible for this, you continue to think you can borrow from the future at a rate of interest. Sorry the Math does not hold up long term.
I'll bite, Mako. Propose a Plan B. You have $1,000 to spare, and I need to borrow $1,000. What are your terms?
I can only tell you the consequences, if you feel alright with the outcome of the eventual collapse at the end of the road you can start charging compounding interest. This collapse will cost billions, not a 100 million.
I can only tell you that you have a choice, I can't promise you that you will like the choices. What you are hinting at is right on the mark, the alternative has consequences as well.
Door #1. High growth potential, at the end of the road eventual collapse due to flawed Math and the wiping out of masses amounts of humans.
Door #2. No or virtually no growth potential, a world where humans get maybe what they need and not what the want, does not collapse due to a flawed Math model.
Really what you want is a Door#3, I don't see any alternative choice.
Door #3: wealth is created by production, and spread around by productivity gains rather than by bubblenomics.
Unfortunately large production is the result of credit and the use of credit in any form. What do humans want in return for their credit, interest especially compounding interest.
You have two door, trying to invent a door that is impossible is not a solution, by picking door #3 you are actually picking door #1, your statement does not address the problem at hand.
Door 3
Destroy the sheep thinking -public schools- and appreciate individualism and contrarians.
Stop Consensus. Bubbles only happen due to consensus.
Financial education.
Today 4 days week would be possible if not for millions and millions of useless jobs that have to be paid by those productive ones.
How can we have not bubbles when most people in "advanced" countries don't know what is Public Debt and are afraid of any Maths.
There is no door #3, you seem to be picking door#2 but door #2 has consequences as well.
No or limited growth, people will basically be down to needs and not wants.
No, I have three doors. Door #3: productivity gains meet or exceed rate of interest on capital borrowing. Your statement ignores this completely. Such situations are possible except when "financial innovation" occurs and con men use leverage and phony ratings to steal from those less well-informed.\
Edit: your two doors are true only when debt is used for consumption. That is when the game turns on itself.
Door #3: productivity gains meet or exceed rate of interest on capital borrowing.
That is door #1 that is what has been going on until 2007, unfortunately humans have no way of sustain exponential growth.
You don't just borrow and pay back, it doesn't get paid back when you have billions of people compounding.
The only way to pay back $53T is to go to $106T, nothing gets paid back. Interest does not exist, the only way you get money to pay the interest is to create more.
I create $1 of debt, interest is owed on that debt, say 10%, after a year I owe $1.10 where does the .10 come from, it doesn't exist unless it's created in the same fashion. now the system is 1.10 but now you owe interest on that.
It doesn't matter what you use the debt for, you are either increasing the debt at the amount of growth needed or you collapse, you can't pay back with what does not exist, the only way it exist is if someone else takes on more debt. It's a one way system, it either expands at a rate(exponential rate) or it starts to collapse.
If you recognize that money is a claim on other people's labor for your benefit, and that money is of no benefit to you after you're dead, then you will naturally demand a premium for delayed gratification/consumption if you are a creditor, and will pay a premium to bring consumption forward if you are a debtor. Because of the time difference, we could say that the debtor will have to work harder than the creditor to enjoy the same amount of consumption.
If you subscribe to the theory that money is created out of thin air, borne of debt, so that every dollar in circulation comes at the price of interest, and stop there, then the math does not appear to work. However, if the creditors spend the interest income into the economy, the debtors, by working "harder", will be able to collect it and pay it back to the creditor, with principal, until the debt/money/future claim on labor is extinguished.
"However, if the creditors spend the interest income into the economy, the debtors, by working "harder", will be able to collect it and pay it back to the creditor, with principal, until the debt/money/future claim on labor is extinguished."
Yeah it works until exponential growth starts to go vertical. The debt of the whole system never gets paid back.
The US credit system has $53T of debt/credit, how would you pay that back? You can't, you can either expand the credit system further or it collapses.
However the amounted to stop it from collapsing goes up exponentially.... humans do not have unlimited power, which is what would be needed to sustain the equation.
We've been deficit spending for some time now, which I think is largely a function of a lack of political will to stop it. And yes, $53T in today's dollars is unpayable without confiscatory taxes to claw back the years of production that should have gone to paying the bills as they were incurred. Expect them to try to monetize it.
As to whether an exponential growth curve's slope is now approaching infinity, that is a matter of perspective. Slide the baseline to the right... Things are no longer priced in 1900's dollars.
$53T could be $1T, you can't pay it back, it's a one way system. The number post WW2 was $440B. The number is irrelevant. You either expand at the rate needed or it collapses.
We are talking about the system not just federal credit creation. $53T is the total debt of the system, of which federal is like $14T, the rest is others.
See Federal Reserve Z1 report for the whole system.
Mako
I take it you agree with this person ..
http://hypertiger.blogspot.com/
More or less correct. It's pure Math. Humans are trying to pretend they are not involved in mass fraud, the collapse of the system has nothing to do with banking or housing or whatever... it's Math. Humans can't order an impossibility.
Humans can run a fraud that is this system for about 60-80 years or a generation or so, it was a fraud when it started and it's a fraud now.
In all of the fancy economic models no one factors in fraud and corruption.
Its like lemmings sitting arguing at the dinner table after 6-7 years saying its gonna be different this time and we will avert the march tothe sea.
It's never different, humans use compounding interest every time.
dude, this guy is AWESOME! Is it Karl Marx's frozen head blogging from its secret vault???
Actually, it's like a 8th grader sat down and looked at an chart of exponential growth and figured out humans have no ability to supply exponential growth. Humans have it down to about 60-80 years or a generation or so.
I don't know if Karl Marx knew or didn't know basic Math, that is all this is, all you are seeing is a breakdown of a simply assumption. The assumption that humans can supply or demand exponential growth.
MILAN (Reuters) - Greece will need to take further action in 2011 and 2012 to repair its public finances, EU Economic and Monetary Affairs Commissioner Olli Rehn said in an interview on Thursday.
I think that, sooner or later, reality must start to permeate into the brains of some substantial minority of market participants. How many times is the can going to be kicked down the road, ever-shorter distances each time? When does the mass realization hit that there is no solution, that all that has been done thus far is forestalling the inevitable?
Since law is anthropological vestige of the financial market, I think that mass protest are temporizing but really not what's needed. Afterall, the police are in the same boat as the protestors although self preservation may have them thinking otherwise. What needs to happen is small groups of individuals need to seek out those who are behind these problems and pay them a visit, very quietly. No street drama please.
I'm sure there are a lot of "Global" interests who would like to begin acquiring land. California looks good, too.
re selling Islands:
That wasn't German humour - they don't have any - it's hinting at a new push for Lebensraum.
The liquidation of the state has begun. Thankfully the big finance houses have plenty of cash to buy.
Not true. They have an island called Rugen.
Steady on there with the civil-unrest-in-Greece theme. Even using only the last 20 years as the yardstick, what we've seen in Greece so far doesn't outshine the worst years of public-sector-union demos in France - or, you know, the LA race riots of 1992. It doesn't even look much more dramatic than some of the friskier G7s. (Speaking of which, Iqaluit is looking good again for next year - or how about Rothera Station?)
They love drama don't they? This kind of protests take place all the time in Greece, even at times when the money was flowing. Please spare us the "civil unrest" and "revolution imminent" news.
H1N1 BONDS: http://2.bp.blogspot.com/_wkgIzuqJM0w/S4-twzWB8tI/AAAAAAAACzo/5zIGY3sKQa...
Even as ECB says Greece will need further measures: What next - mandatory selling of citizens' kidneys for debt reduction
I believe the Russian Israeli Mob still has a network for moving kidneys if they need to get it up and running fast.
I just booked my summer island vacation - one week in Mykofurt and one week in Lesberg.
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