View Single Post
Old 02-13-2019, 05:32 AM
Danny B Danny B is online now
Platinum Member
Join Date: Oct 2012
Location: L.A. Ca.
Posts: 4,433
Savibgs,,Can't pay bills, China, Hormesis & sinecure

Hmmm, my very short post this morning has disappeared. At least it was short. I want to write about the big picture but, I try not to include too many things at once.
Traditionally, an economy expanded and grew by carefully using savings for investment / growth. Savings were at risk and money was loaned carefully.
Samuel Untermeyer: "Is not commercial credit based primarily upon money or property?"
J. P. Morgan: "No, sir; the first thing is character."
Untermeyer: "Before money or property?"
Morgan: "Before money or anything else. Money cannot buy it."
Well, the bankers didn't much like this arrangement. Regulatory capture allowed them to expand credit without any practical limit. Moral hazard was out the window. The corporate structure ensured that legal hazard was close to non-existent.
Douglas MacArthur, " History fails to record a single precedent in which nations subject to moral decay have not passed into political and economic decline. There has been either a spiritual reawakening to overcome the moral lapse or a progressive deterioration leading to ultimate national disaster."

When credit creation became untethered from savings,,,, when the State was no longer limited by a gold standard, the world bankers went on a great binge. If a little bit of credit is good then, obviously, a LOT of credit is better.
" Hormesis is a term used by toxicologists to refer to a biphasic dose response to an environmental agent characterized by a low dose stimulation or beneficial effect and a high dose inhibitory or toxic effect."

"Self-liquidating debt adds to the total debt in the economy, but rather than heighten the economy’s debt burden it usually reduces the burden by increasing the wealth or productive capacity created by the project by more than the cost of the project"
"Debt that is not self-liquidating increases the total debt in the economy and, because it doesn’t improve debt-servicing capacity, usually adds to the economy’s debt burden
Debt that isn’t self-liquidating is necessarily serviced only through implicit or explicit transfers from one economic sector to another. I
"John Stuart Mill explained in an 1867 paper for the Manchester Statistical Society, “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works.”

Yesterday we alerted you to the latest assault upon savings — negative interest rates.

During economic stress, negative interest rates would crack open the piggy bank… and spill its contents into the productive economy. But in dark times saving locks needed capital out of the productive economy.
Investment, meantime, answers a higher calling. It is publicly minded. It pitches in… and expands the economy.
"Explained the late economist Murray Rothbard:
Savings and investment are indissolubly linked. It is impossible to encourage one and discourage the other. Aside from bank credit, investments can come from no other source than savings… About that bank credit,,,

Kunstler, "The self-proclaimed socialists are actually seeing the world through a rear-view mirror. What they are really talking about is divvying up the previously-accumulated wealth, soon to be bygone. Entropy is having its wicked way with that wealth, first by transmogrifying it into ever more abstract forms, and then by dissipating it as waste all over the planet. In short, the next time socialism is enlisted as a tool for redistributing wealth, we will make the unhappy discovery that most of that wealth is gone.
We have a new kind of mass squalor in America: a great many people who have nothing to do, no means of support, and the flimsiest notions of purpose in life. The socialists have no answers for them. "
Mistaken Futures - Kunstler

" People may not see liberalism as their problem, or even know, let alone understand the term, but what they do understand is they can’t pay their bills anymore.
it’s not some ideological question or fight, it’s about people not being able to pay their bills, and about politicians leaving them hanging all alone in a freezing wind.
But if anything, Brexit is not a cause but a mere symptom of the British variety of the Great Discontent. The cause is that in Britain, too, people can’t pay their bills anymore. One country gets Trump, the next one Yellow Vests, and the third gets Brexit.
The main upcoming event in media and politics won’t be the Great Political Discontent, it will be the economic one. Those who can’t pay their bills today will be the first victims of the massaged economic numbers finding themselves subject to gravity once again. Central banks won’t be able to prop up the zombies anymore, or the facade."

EVERYBODY is trying to lock in a salary and/ or a pension. As automation wipes out more and more job niches. more and more people try to access the public food trough. The European Union is a perfect example. The overlay of the EU bureaucracy on top of the existing bureaucracy reduced GDP by 20%. Full employment for bureaucrats. they specialize in writing stupid laws and collecting golden pensions.
It's the same around the developed world. As automation wipes out job niches, everybody wants to work for the State.
"Debt that is not self-liquidating increases the total debt in the economy"
Society created the State to order things to b ring more security and prosperity. That idea is long gone and the bureaucracy is self-perpetuating.

On to China. It looks like they will meltdown before Europe or Japan.

2/12 Europeans must get rid of the failing EU one way or another – MarketWatch
2/12 Today is the 20 year anniversary of the Bank of Japan cutting rates to 0% – ZH

It's been non-stop printing ever since.
Please consider £11 Trillion Debt Wave as Governments Borrow More Than Ever Before. But more than £2 trillion is new borrowing as nations continue to add to their national debts, Amidst all this nonsensical talk of austerity, government debt keeps expanding, and expanding, and expanding. "
NO mention that over 22 million Americans work for the GOV. They borrow to keep bureaucrats and lawyers from learning what their actual value to society really is.

2/13 Fed to finalize plans to end balance sheet runoff ‘at coming meetings’ – Reuters
The FED was holing about $4.1 trillion and, sold about 10%. NOW, they are stuck with it.
2/13 A record number of Americans are 90 days behind on their car payments – CNBC
2/13 Household debt up 18 consecutive quarters to a new record – Mish

Living on plastic.
2/13 Red flags emerge as Americans’ debt load hits another record – Reuters Living o plastic.
2/12 Wealth concentration near ‘levels last seen during the roaring twenties’ – Seattle Times
2/12 US job openings soar to all time high: 800k more than unemployed workers – ZH That's amazing. 96.2 million Americans are not in the labor force.

2/12 China’s private firms hit by default contagion – Reuters The banks took all the money, the corporations are broke.
2/12 China: harbinger of global economic decline – Claudio Grass
2/12 China’s problems hit it all at once – Bloomberg

Much as they would like to, China can't shut off the money spigot. The profitless companies would close an lay off millions. That Chines liquidity is flowing into American stock markets.
Reply With Quote