Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Instead of making smug proclamations about why MD's word choice is incorrect you could actually enlighten us as to why the question, and the proposition of unsound debt that it depends on, are absurd.
What is "unsound debt"?!
Only on PO.com can you get away with making such ridiculous statements without anyone questioning you. What are unsound debts? Unsound debts - a concept unheard of previously, but presented here as fact, and not questioned by anyone. PO.com is weird. Weird weird weird.
In the weird world of po.com, if you dare say anything positive, you get ripped to shreds; but say something negative, no matter how ridiculous, and noone bats an eyelid.
<rant mode off>
It's interesting that it looks as if po will occur at approximately the same time as peak-debt. When we look back at the peak from a post-peak viewpoint, maybe the coincidence of the debt-peak and oil-peak will have seemed predictable; like we should have seen them both coming.
Logically it makes sense that post-peak, debt will fall. The higher interest rates are, the less people want to borrow. As oil gets more expensive, prices of everything go up, ie. inflation goes up, so the central banks raise interest rates to control their money supplies. So almost by definition, does po mean peak-debt.
What is "peak debt"? Only on Peak oil would you hear such utter nonsense. How can debts peak? If we're dealing in a world of abstractions here, why use terms that infer a tangible correlation? The insipient use of a shared division of labour juxtaposed within the contextual framework of a capitalist traditional modality presupposes an axis point of immense proportions.
Damn--I thought someone would instantly spot my stream of consciousness nonsensical post. Oh well. It really reads like something completely incomprehensible in an economics book.
NERO, I think the actual problem is the feedback loop created by an economy where "labour" in exchange for fresh money from lender, has changed. The labour produced to pay back the lender is no longer one of a farmer harvesting his fields and paying the bank back. The borrower is likely somehow connected to the construction industry, building houses that are utterly dependant on the loan industry. Construction has become an extension of the lending institutions, along with all the attendant servicing, insuring, accounting jobs.
When the economy is "financialized" in this way, you have a loaner and a loanee engaged in an incestuous relationship that can thrive for a time, but at a great cost. The economy they give birth to is going to degrade after several iterations of this kind of activity. As in genetics, same with the economy. Perhaps this is a better metaphor. It will most likely be expressed in a currency that is worth very little.
Joined: May 22, 2004 Posts: 1437 Location: Ottawa, Ontario
Posted: Tue May 24, 2005 9:32 pm Post subject:
threadbear wrote:
Damn--I thought someone would instantly spot my stream of consciousness nonsensical post. Oh well. It really reads like something completely incomprehensible in an economics book.
I thought it was inspired nonsense. Either you have long experience with it or you simply have a gift for the bafflegab.
I think your idea of "incestuous banking relationships" sounds very much like a bubble, of which we have had many examples. I think the tendency to bubbles is a serious problem for modern capitalism, I was rubishing the theory expounded in Cojock's post that there was a fundamental requirement for exponential growth in the money supply. _________________ Biofuels: The "What else we got to burn?" answer to peak oil.
Joined: Jan 04, 2005 Posts: 623 Location: Australia
Posted: Tue May 24, 2005 11:19 pm Post subject:
nero wrote:
I'll just jump in here and agree with jaws. I'm tired of that fallacy being repeated as well. I wonder, why is it so darn popular in these forums. Where exactly do you guys pick up this meme? Is it from Heinberg or do you get infected only once you start reading about this idea on PO.com?
Memes that 'prove' we are doomed are popular around here.
Here's something that says it better than I did, I just found it on another thread-Tipping Points.
"This derivative market continues to expand and the amount of leverage in the world’s financial system also continues to expand exponentially with breakthroughs in financial engineering. The financial economy has grown to be so much larger than the real economy, which is a reflection of the true rate of inflation. The real economy is where widgets are made, factories are built, oil is found, minerals are mined, plumbing is fixed, children are educated, and the sick are healed.
On top of the real economy lies the financial economy made up of bank and central bank credit, mortgage securitization and derivatives. This is where the real outlet for inflation has taken its course. It is a world of excesses — excesses in credit, excesses in speculation, and excesses in risk-taking. This is where the real danger of risk contagion will have its genesis."
From the master Machinehead, himself. His comments on Doug Noland's theme about the closed loop nature of the economy. Machinehead is hands down the best analyst out there, but labours in relative obscurity on this message board.
"Bingo -- most economics textbooks are from the industrial (capital investment) era, not the Asset Bubble (financial investment) era. A secular change has occurred.
Doug then takes direct aim at the 'conundrum' -- the puzzle of how, in contrast to normal experience, we can borrow more and more without driving up rates to restrict demand:
This is what I was trying to explain the other day by comparing the economy today with incestuous inbreeding, and the attendant degradation of the offspring or currency.
I hope it's okay to link to this economic/political forum. The posters there have been of great help to me personally, just because of the non-dogmatic, clear thinking. It's refreshing
So, yeah, we're screwed. I'm not even sure if the Dow will be above 1000 for the rest of the decade. BTW, have you ever read any of Jim Puplava's stuff? http://www.financialsense.com/
I'm tracking his predictions from his series "The Day After Tomorrow", so far he's pretty much spot on. That's very bad... _________________ Gravity is not a force, it is a boundary layer.
Everything is coincident.
Love: the state of suspended anticipation.
To get any appreciable distance from the Earth in
a sensible amount of time, you must lie.
I'll just jump in here and agree with jaws. I'm tired of that fallacy being repeated as well. I wonder, why is it so darn popular in these forums. Where exactly do you guys pick up this meme? Is it from Heinberg or do you get infected only once you start reading about this idea on PO.com?
It (fractional reserve banking) is actually taught in money and banking classes at universities by professors of economics, at least at the university of oregon in my experience. So the "fallacy" did not originate with Heinberg or PO.com at all. Its common knowledge for people that have been educated in finance in college.
I suspect that you do not understand what our current Money is and how it is created. In the UK only 3% of money in circulation is cash which is non-interest-bearing.
The other 97% in circulation is loaned into existence by "Credit Institutions" ie Banks or Building Societies and two third of this came into existence as mortgage loans. Unfortunately, when Credit Institutions create this Money they do not create the necessary credit/money to pay the interest on it.
Which is why Money and Debt (two sides of the same coin) increases exponentially: why we are driven to "Economic Growth " regardless of the effect on the planet - and why there can be no such thing as Peak Debt unless we are able to create a form of non-interest bearing Money with which interest-bearing debt/money may be repaid.
This is wrong and I'm tired of seeing it repeated around this forum. Interest existed during the middle ages, when the economy certainly wasn't expanding exponentially. Interest is just a trade between two people. Picture that money is just a claim on work. One person trades a certain amount of work in the present in exchange for a larger amount of work in the future. There's no need for the total amount of work done to increase, since the person borrowing work sacrifices the fruit of some future work to pay back the debt.
In a Robinson Crusoe economy, Friday may agree to help Robinson build up his shack for an entire day in exchange for Robinson helping him fish every day for an hour for a year. There's no growth in the economy possible in this scenario, but interest still exists.
Interest has alway existed. however, currency was not backed by debt back then. it was backed by precious metals or other commodities. There is no way around it. Endless growth is needed for our current financial system, and the earth is finite. unless you can get off the planet or create matter or energy, there will be (choose your prefered term): a correction, crash, recession, depression, bubble bursting, time-bomb, implosion, explosion, "slowing" "easing", et al of the economy.
Joined: May 22, 2004 Posts: 1437 Location: Ottawa, Ontario
Posted: Tue Jun 28, 2005 10:49 pm Post subject:
max_power29 wrote:
It (fractional reserve banking) is actually taught in money and banking classes at universities by professors of economics, at least at the university of oregon in my experience. So the "fallacy" did not originate with Heinberg or PO.com at all. Its common knowledge for people that have been educated in finance in college.
The meme I was dissing was not the fractional reserve system but the idea that there is a flaw in the debt based monetary system that requires continuous growth or else people will no longer be able to pay the interest on their debt. I don't believe THAT is taught in university, it certainly wasn't in my macroeconomics class and since it isn't true that was a good thing. _________________ Biofuels: The "What else we got to burn?" answer to peak oil.
Joined: May 02, 2005 Posts: 3542 Location: On the ball
Posted: Tue Jun 28, 2005 10:53 pm Post subject:
nero wrote:
max_power29 wrote:
It (fractional reserve banking) is actually taught in money and banking classes at universities by professors of economics, at least at the university of oregon in my experience. So the "fallacy" did not originate with Heinberg or PO.com at all. Its common knowledge for people that have been educated in finance in college.
The meme I was dissing was not the fractional reserve system but the idea that there is a flaw in the debt based monetary system that requires continuous growth or else people will no longer be able to pay the interest on their debt. I don't believe THAT is taught in university, it certainly wasn't in my macroeconomics class and since it isn't true that was a good thing.
It is true if expenditures continue to be higher than income, for individuals anyway. I think this is where the connection is coming from. The macro economy does not easily submit to simplistic models though. _________________ "It's still all about energy!"
The meme I was dissing was not the fractional reserve system but the idea that there is a flaw in the debt based monetary system that requires continuous growth or else people will no longer be able to pay the interest on their debt. I don't believe THAT is taught in university, it certainly wasn't in my macroeconomics class and since it isn't true that was a good thing.[/quote]
My macroeconomics class did not even cover the federal reserve system in detail if at all. Did you take any upper division finance/economics?
Our "money" itself is literally debt. It is not an asset. the all-mighty dollar is a debt. It is literally created out of thin air from issuing debt. NO RATIONAL PEOPLE will invest in anything that does not promise a return. Tell me, how in the world can the interest be paid without growth? Think of a Ponzi scheme. Why does it collapse? It is the EXACT same flaw. Ponzi schemes would work if everlasting growth could be sustained.
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