The Keynesians Were Wrong Again

[kashirin]

Quote from Cache Landing:

Homes aren't everything but it is at the root of the problem. Inflation makes all debt cheaper relative to cost of living. Wages will always keep up, although they do lag inflation during recessions.

I've not seen much evidence that local unemployed are pressuring wages downward. Most companies do not decrease wages, but rather simply lay people off. The ECI hasn't yet gone negative, and inflation on a consumer level isn't out of control YET.

Recessions will always result in a cash flow away from the middle class and toward the upper class, as the middle class find themselves much too leveraged and just barely undercompensated. Lower class just continue to be lower class.

do you smoke something?
if so we would live in a permanent hyperinflation as all debt would evaporate overnight and everyone would be happy

basically this is life without money or so called communism, if you know

people who own debt will never allow that

housing is definitely not the root of the problem

root of the problem - debt, fiat system and boom bust cycles

now housing, before that tech bubble, before that ...

this is how this system works - if not housing it would be something else

 

[Cesko]

If we need to pay people to do nothing, it is a sign of our success and efficiency from technology gains. I'm all for redistributing work hours so everyone has some work...

One of the dumbest shit I've ever read on Internet.WOW

 

[Cache Landing]

Quote from kashirin:

do you smoke something?
if so we would live in a permanent hyperinflation as all debt would evaporate overnight and everyone would be happy

basically this is life without money or so called communism, if you know

people who own debt will never allow that

housing is definitely not the root of the problem

root of the problem - debt, fiat system and boom bust cycles

now housing, before that tech bubble, before that ...

this is how this system works - if not housing it would be something else

C/mon man. Why do people like you exaggerate and assume that every strategy would continue at a rapid pace in perpetuity? Makes this sort of discussion completely pointless.

Inflation makes mortgages cheaper. It's a fact. It makes all installment loans cheaper, because historically, wages have ALWAYS caught back up. Debt holders allow it, because they either have no control over it, or because it is better than the alternative of getting stuck owning homes that they never wanted. Lenders know that this is the case and they expect it.

Of course, the ultimate root of the problem lies in the fiat system and boom/bust cycles. The question is which aspect of a bust cycle is least tolerable by the masses. In this case it is losing their homes. Can it be solved? YES!!! Will it come at the expense of almost everything else? Also a resounding yes.

Subsequently, food will be more expensive, as will clothing, transportation, rent, and just about everything else. But people will be better able to make their house payment, and subsequently home values will stop declining, and banks will not be worrying about next year's foreclosures.

 

[Eight]

Keynes wrote when the US was on the gold standard for one thing, going off the gold standard was a big game changer.. for another thing, there is no proof that he was ever correct, it seems like the evidence is to the contrary... his big success was that his ideas are great for the POLITICIANS.... they love that stuff... spend like crazy, usually in the direction of their friends or voting constituency, then retire and live off the fat of the land that they created...

We don't really have natural disasters or economic disasters of a scope large enough to match our ongoing political disaster... the politicians like to blame everybody else, the Chinese, the Bankers, the opposing party, the economics, etc, the current crop of idiots talks of financial crisis; bullshit, it is a financial crisis as a result of political disaster from the 90's when "deregulation" was the watchword of the day so much that even Clinton let some horrible stuff slip past him.. he was supposed to be so smart but he got bamboozled..... but they are the ongoing disaster that we need to quell somehow...

Obama had six months to convince the world that the US could have a regulatory system in place that would work and to attain transparency of the toxic assets.... I don't think he's done either of those things and his commie obsession with healthcare reform certainly isn't assuring to anybody that the US is going to be the world economic leader forever...

 

[Trendytrader]

Quote from scriabinop23:

You're out of touch, and all of your posts are dominated by your bias. The totally 'tapped out jobless folk' you refer to are not the majority of people out there ... in fuzzy numbers, they are a marginal 15-25% . The rest as an aggregate have an enormous earnings capacity and aren't under this sort of stress. And just maybe the top 1% or top 5% will gain even more wealth from the lower 99% by the time this is cycle is over. Perhaps this is class dichotomy and redistribution of wealth, but it is nothing unusual for a capitalistic economy. Get some perspective ...

Sorry but all of the folks I know earning >$150k/pa are tapped out on there home equity, credit cards etc. The issue is bigger than you think. Now the shit has hit the fan funding their kids $40k/pa college education is becoming a big issue. More pain to come.

 

[greddy]

It seems like everything Obama wants to do
is against Austrian economic principles.

We are in the biggest Keynsian experiment
in history.

 

[ByLoSellHi]

Quote from Trendytrader:

Sorry but all of the folks I know earning >$150k/pa are tapped out on there home equity, credit cards etc. The issue is bigger than you think. Now the shit has hit the fan funding their kids $40k/pa college education is becoming a big issue. More pain to come.

Spot on.

People got so indebted with homes, cars, college tuition, medical bills, and credit card $$$, they're upside down no matter how much they make now that the value of their core holdings have tanked (401(k)s, homes, etc.).

If they're laid off or even take a small salary or income cut, the musical chairs stop and they have no seat.

This is why credit to consumers dropped by a massive record in August and will continue to drop - those who want credit can't get it, and those who can get (as few as they are) don't want it.

 

[kashirin]

Quote from Cache Landing:

C/mon man. Why do people like you exaggerate and assume that every strategy would continue at a rapid pace in perpetuity? Makes this sort of discussion completely pointless.

Inflation makes mortgages cheaper. It's a fact. It makes all installment loans cheaper, because historically, wages have ALWAYS caught back up. Debt holders allow it, because they either have no control over it, or because it is better than the alternative of getting stuck owning homes that they never wanted. Lenders know that this is the case and they expect it.

I don't know what kind of inflation we talk about but
the only example when we saw wages caught back inflation was 70s

history full of examples when high inflation didn't increase nominal wages but significantly devalued standard of living

just came from Ukraine -
they had credit boom 2-3 years ago.
currency devalued 100% since last year, inflation is 20% annually for several years - nothing is resolved, credit virutally evaporated, economy went to cash,economy gets worse and worse

most eastern europe the same thing

inflating debt doesn't work

 

[Random.Capital]

Quote from Cache Landing:

Inflation makes mortgages cheaper. It's a fact. It makes all installment loans cheaper, because historically, wages have ALWAYS caught back up.

That is absolutely 100% incorrect. History is littered with examples to the contrary, where the result is a very long term continual downgrade in living standards, or a complete economic reset through sovereign default.

 

[the1]

You don't have to look much further than the rise and fall of the Roman Empire to see the US is on a big downward spiral. The death blow to the Romans was heavy social programs and an unsustainable military abroad. Sound familiar?

The interest on the US's debt recently exceeded the annual military budget (sorry, no source). The interest on the outstanding debt is rising parabolically. That can only end in one way. No, not default because the government can create as much of its own money as it wants. The collapse of the US will occur when the world loses faith in the currency. When the US dollar is no longer exchangeable for goods and services the country will collapse. A fiat currency will only survive if consumers and producers have faith in the currency. One way to destroy that faith is massive deficits, heavy social programs, and an unsustainable military abroad. The clock is ticking...