Balance Sheet Recession Presentation

[conraddobler]

http://www.businessinsider.com/richard-koo-recession-2010-4#-1

That's a very good presentation on how our situation is very much like the situation in Japan.

Debt bubbles burst when asset values burst and it take a very long time to repair that damage in the private sectors balance sheets.

We seem to be nicely following along their tragectory and that means this is going to last a very long time.

Nothing terrible is going to happen right away but eventually the government debt will grow to gigantic proportions because it'll continue making up for the money we're not spending or borrowing.

Unless they go full on austerity which will cause the economy to implode much faster.

 

[82CardsGrad]

Solid illustration there C-Rad... It's still very difficult for me to accept what appears to be the reality - that conditions will only improve if the gov't continues to deficit spend... While the facts seem to confirm this, it still feels wrong to me.
IMHO, this level of gov't fiscal intervention is only setting us up for prolonged sub-par financial performance. Yes, gov't spending appears to have taking the edge off of what could have been a depression vs a great recession. However, if experiencing a more harsh downturn now would have meant a quicker return to normalcy, I'm pretty sure I would voted in favor of the quicker return...

 

[conraddobler]

Solid illustration there C-Rad... It's still very difficult for me to accept what appears to be the reality - that conditions will only improve if the gov't continues to deficit spend... While the facts seem to confirm this, it still feels wrong to me.
IMHO, this level of gov't fiscal intervention is only setting us up for prolonged sub-par financial performance. Yes, gov't spending appears to have taking the edge off of what could have been a depression vs a great recession. However, if experiencing a more harsh downturn now would have meant a quicker return to normalcy, I'm pretty sure I would voted in favor of the quicker return...

I don't always inject my personal feelings into observation posts like the one above.

It feels wrong IMO because IMO it is wrong.

Our modern economic system is nothing but a tool used by connected elites to skim the cream off the top.

Thus no one running it has any real concern for actually maximizing citizens real wealth accumulation.

It's about control and about power and as such they manufacture whole realities where we have no choice but to do what gives them more control, that's their entire point in the first place.

Being where we are is a function of their previous efforts at this, and it was a success, to get down from where we are at and head towards what's good for everyone is impossible without gigantic pain, even if it would be short lived as it would be IMO.

The government needs to shrink monsterously, public spending of all kinds needs to be replaced by private spending but given where we are now that's not going to happen right now.

It's all a well designed box to harvest value from citizens, it's working.

Clawing out of the box would require bloody fingertips and huge efforts but in the end, you'd be out of the box.

Realistic steps to do this would have been taking down the TBTF banks and cutting them up to smaller solvent rivals, taking down gambling and replacing it with incentives to invest.

I'd substitute a flat tax in for our current tax structure, of 11% and just be done with that, then re-align governments size based on what we have to work with.

The size of all this monsterous bubble does not allow for a painless way through but there is a best way through, we're no where near that IMO.

It's like a golf swing, if your swing is completely jacked up and you have to play a tournament tomorrow, the best you can do is go with your jacked up swing and play, if you try and rebuild your swing that day, you're hosed.

If on the other hand it's truly jacked up you have to start from ground zero and rebuild it, that takes time and a lot of effort but in the long run it's the correct way to maximize you results.

 

[conraddobler]

http://market-ticker.org/archives/2458-Economics-Is-Hard.html

This is another excellent piece that shreds modern economic theory.

Economics is not that hard.

Think of it as nature.

In nature do you see systems that never experience ebbs and flows?

No, you do not, and natures response is not some Federal Reserve or Central Banking solution, natures solution is redundancy and covering all the bases.

Nature isn't pretty though, there are winners and losers and it's brutal to watch, however if you tried to tame the systems well then you lose a lot of the redundancy and the natural stenghtening powers of the system, it's as simple as that.

Nature will run wild if you tweak it by upsetting the order, it will build momentus bubbles in population then the population will crash and burn.

What modern economics does is upset the order by trying to level out the ebbs and flows, now this is a nobel idea but in practice when combined with human frailties like greed, it produces an enviroment where value or capital is missallocated and thus causes the optimization of the natural system to be degraded over time more and more as more and more tweaks are used.

It so weakens the natural healing powers of the system that we get farther and farther away from the maximized result.

To help something in nature you have to take so many variables into account it's dizzying, most of the things done in modern economies are never done with that level of thought into all implications and in practical applications even that would fall short most of the time.

By giving money to support some failing industry, I'm sucking up capital that would flow to the next possible replacement of said industry, there's no way around that opportunity cost.

The cost of the tweaks is always way more than advertised because it never factors in what did not occur that might have in a dynamic system that's it's lifeblood, replacing that which fails with that which does not fail, that's what makes it all go.