Isn't it always a thing before a bubble pops where everyone says the bubble wont pop.
The article lost me at "... given the driver is cash printed by central banks, indications it could pop are scant."
This Bubble's Got Legs
41–50 of 131 posts
Re: This Bubble's Got Legs
#42Earlier quoted context omitted.
The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help. Note the US Federal government owns so much land in the Western part of the country and Alaska that that alone might allow it to get its fiscal house in order, and could certainly help. I mean, isn't it everyone's dream to have title to a plot of Alaskan tundra ^_^? Obviously it would be very hard to make thi…
Government debt, while large, is not the core issue. Private debt is the issue. Steve Keen has been hammering this for years: https://www.youtube.com/watch?v=CLplU4WdX9A https://www.youtube.com/watch?v=ocQWs8EteqI http://www.debtdeflation.com/blogs/
IMHO the worst form of private debt in our present economy is personal private debt. We are in a severely demand constrained economy, and personal private debt is really what's weighing the economy down and soaking up consumer demand. Also unlike corporations individuals cannot do debt/equity swaps or raise money by issuing shares in themselves, so personal private debt is harder to renegotiate or reorganize into a more manageable form.
Corporate private debt is maybe the next worst, but as I said corporations have many more tools for dealing with it especially if they are otherwise healthy. There's a huge market out there for equity in healthy and especially growing companies.
I have heard the interesting view that government debt and private debt are not even the same thing.
When you think about it: the government prints its own money (or authorizes the entity that does, e.g. the Fed). How can you truly owe a debt in your own sovereign (fiat) currency? How is debt still a meaningful concept there?
It seems to me (and IANAE) that government debt is more like equity in the nation. Owning a bond is like owning stock in the USA, but with the caveat that you are forced to resell this stock at its maturity date. Maybe something closer to a weird kind of convertible note.
Re: This Bubble's Got Legs
#43If you're interested in monetary policy and a fundamental analysis of the state of money and banking in the world today, I highly recommend "The End of Alchemy" by Mervyn King [0].
The book starts with a long history of why we have money at all, why it takes the forms it takes, and how banks evolved into their current role. It then goes on to describe why there is so much inherent risk in our banking system and what we could do to reduce or eliminate it.
As someone who follows financial news but has no formal education in finance, I found the book enlightening and extremely readable.
[0] - https://www.amazon.com/End-Alchemy-Banking-Future-Economy/dp...
Re: This Bubble's Got Legs
#44The financial problems originated with excess debt, but debts that are so large that they cannot be paid back - will not be paid back. Inflating assets via QE doesn't really address the real underlying problem. The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help. For example, when the Banks were technically insolvent then the opportunity should have been taken…
The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help. Note the US Federal government owns so much land in the Western part of the country and Alaska that that alone might allow it to get its fiscal house in order, and could certainly help. I mean, isn't it everyone's dream to have title to a plot of Alaskan tundra ^_^? Obviously it would be very hard to make thi…
Even taking the silly assumption, for the sake of this argument, that the federal government's finance is just like a giant household, its debt figures are fine.
It has a debt-to-income ratio of 14.3, the highest possible credit rating, and assets that far exceed debt. Lenders would be tripping over themselves to lend to to such a household, and lo and behold lenders are tripping over themselves to lend to the USG.
This dour anti-debt Puritanism is dumb enough when it comes to individuals, but makes no sense at all when it comes to government.
Re: This Bubble's Got Legs
#45Earlier quoted context omitted.
Government debt, while large, is not the core issue. Private debt is the issue. Steve Keen has been hammering this for years: https://www.youtube.com/watch?v=CLplU4WdX9A https://www.youtube.com/watch?v=ocQWs8EteqI http://www.debtdeflation.com/blogs/
IMHO the worst form of private debt in our present economy is personal private debt. We are in a severely demand constrained economy, and personal private debt is really what's weighing the economy down and soaking up consumer demand. Also unlike corporations individuals cannot do debt/equity swaps or raise money by issuing shares in themselves, so personal private debt is harder to renegotiate or reorganize into a m…
How is debt still a meaningful concept there?
I still think debt is a meaningful concept there, in that that that debt is going to be relied on by the holders to provide an income in the future that they are thinking of in terms of a reasonable increase in the general money supply and inflation. It's not a black and white situation as with personal debt and I'm certainly more sympathetic than I used to be to the idea that excess sovereign debt isn't a serious issue (as long as the sovereign controls the underlying currency, looking at you Greece).
On the other hand, I think the same analysis tells us that the sovereign should just print the money and distribute it (via, say, a citizens dividend or Keen's modern debt jubilee) rather than rely on the banks debt-creation mechanism.
Re: This Bubble's Got Legs
#46Earlier quoted context omitted.
The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help. Note the US Federal government owns so much land in the Western part of the country and Alaska that that alone might allow it to get its fiscal house in order, and could certainly help. I mean, isn't it everyone's dream to have title to a plot of Alaskan tundra ^_^? Obviously it would be very hard to make thi…
Even taking the silly assumption, for the sake of this argument, that the federal government's finance is just like a giant household, its debt figures are fine. It has a debt-to-income ratio of 14.3, the highest possible credit rating, and assets that far exceed debt. Lenders would be tripping over themselves to lend to to such a household, and lo and behold lenders are tripping over themselves to lend to the USG. T…
It isn't "dumb puritanism" when applied at the individual level.
The problem is private debt, particular private debt that doesn't self-liquidate (consumption). See Steve Keen (certainly no puritan on debt) on the distinction between public debt and private debt and its effects on the economy.
Re: This Bubble's Got Legs
#47This is scary as I moved to all cash a couple of years ago. I still don't understand how there can be a bubble in money. All I see around me is house and stock prices going up incredibly. Does a money bubble popping result in high inflation making my money in the bank worthless. Fuck. First I got burned in stocks, then in real estate, and now cash?
Re: This Bubble's Got Legs
#48The forrest is dry, just waiting for a black swan. The problem with black swans is they are definitionally unknown unknowns... until they are not any more.
Re: This Bubble's Got Legs
#49Earlier quoted context omitted.
The only long-term solution I have seen is Debt for Equity swaps. It won't work everywhere, but it does help. Note the US Federal government owns so much land in the Western part of the country and Alaska that that alone might allow it to get its fiscal house in order, and could certainly help. I mean, isn't it everyone's dream to have title to a plot of Alaskan tundra ^_^? Obviously it would be very hard to make thi…
Even taking the silly assumption, for the sake of this argument, that the federal government's finance is just like a giant household, its debt figures are fine. It has a debt-to-income ratio of 14.3, the highest possible credit rating, and assets that far exceed debt. Lenders would be tripping over themselves to lend to to such a household, and lo and behold lenders are tripping over themselves to lend to the USG. T…
I'd thought we'd reached, or will in short order, the debt to GDP ratio where, historically, countries sooner or later repudiate their debt one way or another (which of course includes inflation).
Of course the Federal Government isn't a "giant household", it's worse in many respects, with the decision makers generally not thinking past the next election, whereas there's a chance in a household the elders will be thinking of the children's futures (things like Social Security, and the general Zeitgeist that the government won't do stupid things like repudiate the debt, have of course helped to sunder the bonds between generations, something I think a lot of "elders" will heartily regret in due course).
Re: This Bubble's Got Legs
#50Earlier quoted context omitted.
Even taking the silly assumption, for the sake of this argument, that the federal government's finance is just like a giant household, its debt figures are fine. It has a debt-to-income ratio of 14.3, the highest possible credit rating, and assets that far exceed debt. Lenders would be tripping over themselves to lend to to such a household, and lo and behold lenders are tripping over themselves to lend to the USG. T…
It isn't "dumb puritanism" when applied at the individual level. The problem is private debt, particular private debt that doesn't self-liquidate (consumption). See Steve Keen (certainly no puritan on debt) on the distinction between public debt and private debt and its effects on the economy. https://www.youtube.com/watch?v=CLplU4WdX9A
How much of our current Federal debt is just funding current consumption?
How much of the budget can truly be scored as investments? Perhaps not even the bulk of student higher education loans....