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Thread: The coming 'tsunami of debt' and financial crisis in America

  1. #21
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    Re: The coming 'tsunami of debt' and financial crisis in America




    Quote Originally Posted by Kurmugeon View Post
    Is there any credence to this model?
    Some, but there are some issues as well.

    Household debt has apparently been dropping as a percentage of GDP. Corporate went up a little bit, but is mostly flat. Financial borrowing also fell. Government is the only one that really went up recently.

    It's certainly not a given that the so-called 99% will continue to increase consumption.

    The biggest portion of household debt is mortgages. If / as 99% gets priced out of the housing market, household debt is likely to fall a little bit.

    The big expansion in household debt over the past few years isn't "buying stuff," it's borrowing for college education.

    Companies aren't actually spending the money they are borrowing -- they're just sitting on it. It is very cheap to borrow, and most of those loans are short-term; they're borrowing to have a cushion, in the event they need to ramp up on short notice.

    Private debts could turn into an issue, when the lessons of the last bubble have worn off. 2017 might be a bit soon for that.




    Can it be countered or stopped? How?
    Companies could pay people more; government could provide more funds to higher education to reduce tuition costs; corporations could reduce borrowing; Americans could stop buying crap they don't need.

    If you think any of that is likely to happen, I have a great investment opportunity for you in a great piece of infrastructure that is about to be privatized....






    When the American common people are force to default on personal debt en-masse, doesn't it follow that the American Government will also have to default as well?
    No.

    The American public did default in huge numbers during the last recession. What they did was deleverage, i.e. they stopped buying homes and crap, and paid off their debts. This in turn aggravated the recession, because so much of our economy relies on people buying homes and crap. What they also did was continue to pay their taxes, at least enough that the government was nowhere near defaulting for anything other than political nonsense in Washington.


    Does the solution lie in Government Action, or in the Private Sector, or Both?
    The single most effective thing the government can do is for the Fed could raise interest rates, which would make it expensive to borrow. This would in turn create a recession. People would buy fewer homes, and less stuff to put in their new homes; businesses (of all sizes) would cut back on inventories and expansions, in part because people are buying less stuff and in part because it'd be more expensive to borrow (and they often need to borrow to expand and/or tide over bad times).

    Now, it might be the case that a Fed-induced recession is, in fact, preferable to a massive debt crunch in the future. However, unless there is an immediate crisis in the here and now, it's not going to happen. Even when there is an imminent issue, it can be tough politically to pull off. For example, Carter appointed Paul Volcker to the Fed, and Volcker insisted on raising interest rates to curb the double-digit inflation of the late 70s. It created a recession at the start of Reagan's term, but it also tamed inflation. Reagan hated the policy, and Volcker got eased out. If for some reason it hadn't worked, Volcker would have been hung in effigy for a generation.

    In other words, even under the best of circumstances, a bubble is extremely difficult to pop early. No one has the incentive to do so. Politicians who do so get blamed for the immediate crash, and don't get credited for the crisis they averted (as we see so obviously with the last recession). The private market wants to ride a wave for as long as possible, in part because everyone thinks they can be the smart one who times the market and makes a fortune. The public still wants to buy homes, send their kids to college, and buy cars. And so on.

    Even when we find a bubble-thwarter that works (like a split between investment and commercial banks), people either find ways around those protections and/or forget that they were useful in the first place.

    So yeah, I'd guess there isn't much to be done about it.

  2. #22
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    Re: The coming 'tsunami of debt' and financial crisis in America

    [QUOTE=Hamster Buddha;1063731811]What does? The fact that unemployment is still crap (along with the rest of the economy) or that our education system is crap? As an American, I can happily answer the question... they both really are crap.[/QUOTE

    From my reading the stimulus was poorly targeted.

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by RDS View Post
    You calling this a stupid solution while you have not come up with a solution. A 6th grader can do that.

    It IS a stupid solution.

    Primarily because we have all the evidence we need to know its NOT going to work.

    Did Japan just disappear off the radar of every Keynesian \ MMTer ?

    And I'm a Texas Conservative. Of-course I have a solution.

    Its the same economic principles that are behind Texas's booming economy.

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by Fenton View Post

    And I'm a Texas Conservative. Of-course I have a solution.

    Its the same economic principles that are behind Texas's booming economy.
    Steal land from Mexico that has oil deposits?

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    Re: The coming 'tsunami of debt' and financial crisis in America

    [QUOTE=RDS;1063731819]
    Quote Originally Posted by Hamster Buddha View Post
    What does? The fact that unemployment is still crap (along with the rest of the economy) or that our education system is crap? As an American, I can happily answer the question... they both really are crap.[/QUOTE

    From my reading the stimulus was poorly targeted.


    EVERY " Stimulus " is poorly targeted.

    Its why they never work and just lead to massive debt.

    One if the primary issues with Fiscal Stimulus is the fact that all that borrowed money gets routed around the very private sector principles that protects us from boondoggles like Obama's " green jobs " initiative.

    Same thing happened in Germany when their Government decided to " invest " in becoming the first Country run totally on renewable energy technology.

    But the technology SUCKS, and now they're burning more Coal than ever while German citizens pay 300 percent more for their electricity than the average American.

    Besides, Obama openly condemns the Free market so you KNOW any stimulus is going to be wasted thoroughly.

    He doesn't understand it and he's ideologically opposed to it so your essentially letting a incompetent invest your money for you.

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by FaceofBachmann View Post
    Steal land from Mexico that has oil deposits?
    LMAO !!!

    What's it take to be a hard core Lib with a Michelle Bachman obsession ?

    A " tenuous " grasp of History and a bag full of talking points apparently.

    Here's the Facts.... Oil and Gas in Texas accounts for only10 percent of our States total GDP.

    That means Texas's economy is highly diversified.

    In California, Silicon Valley ALSO accounts for 10 percent of that States GDP AND California is the Nation's 4rth largest Oil producer.

    So why the distinction ? Why are millions of Californians moving to Texas ?

    Why have nearly 200 Companies bailed on the Blue plague State California and moved here ?

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by Fenton View Post
    LMAO !!!

    What's it take to be a hard core Lib with a Michelle Bachman obsession ?

    A " tenuous " grasp of History and a bag full of talking points apparently.

    Here's the Facts.... Oil and Gas in Texas accounts for only10 percent of our States total GDP.

    That means Texas's economy is highly diversified.

    In California, Silicon Valley ALSO accounts for 10 percent of that States GDP AND California is the Nation's 4rth largest Oil producer.

    So why the distinction ? Why are millions of Californians moving to Texas ?

    Why have nearly 200 Companies bailed on the Blue plague State California and moved here ?
    Without oil Texas would have even lower per capital income than Alabama, and it's almost there with oil.

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by FaceofBachmann View Post
    Without oil Texas would have even lower per capital income than Alabama, and it's almost there with oil.

    Gotta Love Texas !

    We've built a Booming economy AND a budget surplus ( 10 Billion ) using Conservative economic principles while a Liberal Progressive President desperately tries to mitigate away his failures through 6 year old Bush blame and outright lies.

    Millions of Americans have left their Liberal Plague States for Texas jobs and no, they're not coming here to be Oil field workers.

    I mean did Toyota abandon California because we have oil ? No, of-course not. What about the nearly 200 other Companies that have abandoned California ?

    How many were connected to the Oil and Gas business ?

    So I love how our success has forced Left wingers into a perpetual state of delusion. They would rather believe their own lies than to admit that they're wrong or worse, that Conservatives are right.
    The New Democratic Party Slogan :

    " Return to Power By Any Means Necessary "

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by Kurmugeon View Post
    Questions for Debate:

    Is there any credence to this model?

    Can it be countered or stopped? How?

    When the American common people are force to default on personal debt en-masse, doesn't it follow that the American Government will also have to default as well?

    Does the solution lie in Government Action, or in the Private Sector, or Both?

    Is it to late?

    -
    The US economy is driven by fiscal irresponsibility. The Middle Class is just an illusion created by credit card debt and bank loans. Fact is, if you want economic growth, you need people to spend money they don't really have. Finding the right balance to allow for economic prosperity and avoid financial collapse is the hard part and the answer lies in both government action and the private sector.
    Last edited by Napoleon; 09-08-14 at 08:08 PM.

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    Re: The coming 'tsunami of debt' and financial crisis in America

    Quote Originally Posted by Fenton View Post
    It IS a stupid solution.

    Primarily because we have all the evidence we need to know its NOT going to work.

    Did Japan just disappear off the radar of every Keynesian \ MMTer ?

    And I'm a Texas Conservative. Of-course I have a solution.

    Its the same economic principles that are behind Texas's booming economy.
    Carbon taxes will work to discourage CO2, but general taxation won't discourage production. It's liberal economics, Fenton, it's completely incoherent.

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