This country is not heading for a total collapse, a great depression is basically a near-impossibility. But, the ongoing and persistent widening gap of haves and have-nots is directly related to work - being exported out of this country (a 30-40 year trend). This credit-as-money collapse has simply highlighted the problems inherent to our system and what must be done to stop the trend.
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I don't think inflation is that big a problem at all, even an inevitability, since you have to expand the base-money supply either to create work-infrastructure-projects, expand the economy, match census reports as a countries population increases, account for increases in GDP, etc.
It's how we inflate the money supply that you, I and many other people have a problem with. As you said, and I totally agree, currently we are reaping what has been sowed: the improper regulation of lending practices (the biggest money supply creation factor). And of course, this can lead to volatile downturns, sluggish growth or non-existent growth. But we are, in a sense, talking about it de facto; as it is; simply as the system exists today. It is neither necessary or ideal, it just is. Bonds, securities, credit, any type of promise to pay interest - often leads to a different type of inflation (other than properly inflating the base-money supply). Speculation usually is not value added inflation (like expanding the base money supply based upon: work, GDP, actual real-world wealth creation, census reports, etc). Buying and selling, in financial markets, often simply drives the price up while no work is being done (no value is added to the inherently worthless paper; potentially worthless paper). In a positive business growth environment the top usually does well, no matter what even while not being efficient or shrewd, but the middle and everyone below the middle does not always go along for the ride. I have major ethical moral philosophical problems with this reality inherent to the state of our current system.
We just take it for granted that it is legal for a bank (a private institution) to make money out of thin air. When clearly the right to make money out of thin air rests with the government for the benefit of the people; and not within the private sector. If I were to do it - I would be jailed if caught and called a counterfeiter and a fraud, but if I am chartered and can come-up with the base secured money amount and meet fractional reserve requirements - I can legally make money out of thin air and inflate the money supply (via issuing credit), speculate in financial markets, cause non-value added inflation or worse reek total havoc. This is why strict regulation of financial markets have to be in place and enforced. They (the banking/financial sectors/like a cartel) have already been granted something - they simply do not deserve: the right to make money based upon fractional reserve requirements. While I fully realize the short comings and dangers, I don't have a problem with this de facto scheme - if someone is investing in a business that leads to work being done in our economy and subsequently leads to quality job creation (with benefits for working men and women). Of course someone should make interest for taking the risk of total financial loss of the capital in question, but it is also based upon the right to create said capital often out of thin air (via OPM; other peoples money; in deposits).
I believe Harvard did a study on the efficacy of 401Ks, IRAs, and other like personal retirement funds and compared them to the pension plans of past industrial corporations and found that average people today are worse off; than their counterparts past and current that had/have a pension plan. Often the markets eat the influx of cash, in fact I and my brother were day traders for a few years in both stocks and commodities, and that is exactly what we would do: bleed the market. An influx of cash may be a great way for an IPO to get access to new capital, but the reality is that professionals are carefully watching and subtly manipulating the markets to remove as much cash influx as possible. Many people retire with a personal retirement fund only to find it is half what they expected it to be - and immediately place themselves back in the job-market with one-year of retiring.
Currently in Florida in the Southeast the credit crisis is particularly worse than other regional areas IMO. But, the problems here are symptomatic of the overall scheme/problem. Speculation in real estate, has driven the base property prices into the stratosphere; and property taxes along with those increases. Even with the recent collapse of 25-35% (rapid deflation) off the high, base property prices are about 250% higher than about 5-10 years ago (that’s about double the inflation rate compounded for 10 years). I own my home - free and clear. The equity appreciation I've enjoyed is ridiculous and utterly do to market speculation. While I would loose some equity if prices dropped more, I don't care - a solid bit of more-deflation in the housing market would be a good thing to young families trying to get into a starter home, but more deflation probably wont happen the market prices are close to the bottom already, because land speculation has priced most new developments out of the market. Most land development projects are simply too risky in the current credit meltdown crisis. Which brings up another problem, currently my clients are having trouble designing a starter home/town-home(s) that they can bring to market, because they are competing with themselves often (when they allowed speculators to flip product). Many new homes bought by speculators at the all-time market high are in foreclosure (with a flood yet to get through the Florida court system). These new homes sometimes are the exact same building product - only 20K to 50K cheaper than the giveaway builder/developers price. I am an advance witness to the declining market, and know things you simply don't want to know. At today's home prices, in the Southeast Florida region, and stricter 20% down lending requirements - many people neither have the down payment nor the income (a quality well paying job) to get into what was once a starter home, and that is in many ways due to the long-term trend of shifting our economy to a consumeristic one, with credit money supply balloons, globalization, etc, and this has left the many average Americans closer to the bottom rather than the middle... as Thomas Jefferson would have put it, I paraphrase, "in debt and homeless on the continent their forefathers conquered."
We are 9 trillion in debt.
With 40 trillion or more in other fiscal commitments.
Our top is distancing itself from bottom and middle America, I think last year more millionaires were made than any other year to date in America.
Wall-street is an utter disconnect - from work; work ethics; and mainstream America. Worse it's often a capital drain in which there is always the potential for near total collapse (in this one market); total loss, for anyone and/or everyone.
We are watching future work (and the jobs that go along with it) being destroyed as credit money supplies are destroyed to the tune of trillions of credit-created dollars; as one bank after another has a reckoning with: speculative lending and/or predatory lending practices.
The reality is real people got out of the markets and got obscenely wealthy based upon speculation; not work. And others who work their asses off have seen their entire life savings disappear in foreclosure along with their business or job.
____
I don't think inflation is that big a problem at all, even an inevitability, since you have to expand the base-money supply either to create work-infrastructure-projects, expand the economy, match census reports as a countries population increases, account for increases in GDP, etc.
It's how we inflate the money supply that you, I and many other people have a problem with. As you said, and I totally agree, currently we are reaping what has been sowed: the improper regulation of lending practices (the biggest money supply creation factor). And of course, this can lead to volatile downturns, sluggish growth or non-existent growth. But we are, in a sense, talking about it de facto; as it is; simply as the system exists today. It is neither necessary or ideal, it just is. Bonds, securities, credit, any type of promise to pay interest - often leads to a different type of inflation (other than properly inflating the base-money supply). Speculation usually is not value added inflation (like expanding the base money supply based upon: work, GDP, actual real-world wealth creation, census reports, etc). Buying and selling, in financial markets, often simply drives the price up while no work is being done (no value is added to the inherently worthless paper; potentially worthless paper). In a positive business growth environment the top usually does well, no matter what even while not being efficient or shrewd, but the middle and everyone below the middle does not always go along for the ride. I have major ethical moral philosophical problems with this reality inherent to the state of our current system.
We just take it for granted that it is legal for a bank (a private institution) to make money out of thin air. When clearly the right to make money out of thin air rests with the government for the benefit of the people; and not within the private sector. If I were to do it - I would be jailed if caught and called a counterfeiter and a fraud, but if I am chartered and can come-up with the base secured money amount and meet fractional reserve requirements - I can legally make money out of thin air and inflate the money supply (via issuing credit), speculate in financial markets, cause non-value added inflation or worse reek total havoc. This is why strict regulation of financial markets have to be in place and enforced. They (the banking/financial sectors/like a cartel) have already been granted something - they simply do not deserve: the right to make money based upon fractional reserve requirements. While I fully realize the short comings and dangers, I don't have a problem with this de facto scheme - if someone is investing in a business that leads to work being done in our economy and subsequently leads to quality job creation (with benefits for working men and women). Of course someone should make interest for taking the risk of total financial loss of the capital in question, but it is also based upon the right to create said capital often out of thin air (via OPM; other peoples money; in deposits).
I believe Harvard did a study on the efficacy of 401Ks, IRAs, and other like personal retirement funds and compared them to the pension plans of past industrial corporations and found that average people today are worse off; than their counterparts past and current that had/have a pension plan. Often the markets eat the influx of cash, in fact I and my brother were day traders for a few years in both stocks and commodities, and that is exactly what we would do: bleed the market. An influx of cash may be a great way for an IPO to get access to new capital, but the reality is that professionals are carefully watching and subtly manipulating the markets to remove as much cash influx as possible. Many people retire with a personal retirement fund only to find it is half what they expected it to be - and immediately place themselves back in the job-market with one-year of retiring.
Currently in Florida in the Southeast the credit crisis is particularly worse than other regional areas IMO. But, the problems here are symptomatic of the overall scheme/problem. Speculation in real estate, has driven the base property prices into the stratosphere; and property taxes along with those increases. Even with the recent collapse of 25-35% (rapid deflation) off the high, base property prices are about 250% higher than about 5-10 years ago (that’s about double the inflation rate compounded for 10 years). I own my home - free and clear. The equity appreciation I've enjoyed is ridiculous and utterly do to market speculation. While I would loose some equity if prices dropped more, I don't care - a solid bit of more-deflation in the housing market would be a good thing to young families trying to get into a starter home, but more deflation probably wont happen the market prices are close to the bottom already, because land speculation has priced most new developments out of the market. Most land development projects are simply too risky in the current credit meltdown crisis. Which brings up another problem, currently my clients are having trouble designing a starter home/town-home(s) that they can bring to market, because they are competing with themselves often (when they allowed speculators to flip product). Many new homes bought by speculators at the all-time market high are in foreclosure (with a flood yet to get through the Florida court system). These new homes sometimes are the exact same building product - only 20K to 50K cheaper than the giveaway builder/developers price. I am an advance witness to the declining market, and know things you simply don't want to know. At today's home prices, in the Southeast Florida region, and stricter 20% down lending requirements - many people neither have the down payment nor the income (a quality well paying job) to get into what was once a starter home, and that is in many ways due to the long-term trend of shifting our economy to a consumeristic one, with credit money supply balloons, globalization, etc, and this has left the many average Americans closer to the bottom rather than the middle... as Thomas Jefferson would have put it, I paraphrase, "in debt and homeless on the continent their forefathers conquered."
We are 9 trillion in debt.
With 40 trillion or more in other fiscal commitments.
Our top is distancing itself from bottom and middle America, I think last year more millionaires were made than any other year to date in America.
Wall-street is an utter disconnect - from work; work ethics; and mainstream America. Worse it's often a capital drain in which there is always the potential for near total collapse (in this one market); total loss, for anyone and/or everyone.
We are watching future work (and the jobs that go along with it) being destroyed as credit money supplies are destroyed to the tune of trillions of credit-created dollars; as one bank after another has a reckoning with: speculative lending and/or predatory lending practices.
The reality is real people got out of the markets and got obscenely wealthy based upon speculation; not work. And others who work their asses off have seen their entire life savings disappear in foreclosure along with their business or job.
Last edited by topal63 (2008-07-21 15:11:38)
