04-11-2020, 12:36 AM
(04-10-2020, 12:19 PM)John J. Xenakis Wrote: ** 10-Apr-2020 World View: Debt not money
vincecate Wrote:> Yes, printing money is like a drug to the economy, at some point
> it will fail. The way it fails is called hyperinflation. I really
> think we are getting close.
No it isn't. That's not even remotely possible. This is the opposite
of hyperinflation.
When people have tons of money, then they buy lots of things, creating
inflation.
It's a speculative boom, a situation in which economic elites have more money than they have a sensible thing to do with while the non-rich either have none or (worse) are heavily in debt. Being heavily in debt for sustenance is arguably worse than being broke, at least financially. Debt is OK if it reduces living costs over the long haul (mortgage loans on a house) or create a better quality of life (owning a car as opposed to relying upon slow and unreliable mass transit) or the means of getting an above-average income (a degree in medicine or law). Otherwise, personal debt for living costs tends to pile up. Debt for sustenance is profitable for lenders who may be making more money than the manufacturer of something purchased on the "never-never" such as an overpriced television or cell phone. An economy based upon paying people in credit instead of genuine pay is itself a house of cards.
Quote:But people have NO money today. They have the opposite. Instead of
tons of money, they have tons of debt, which is the opposite. They
have tons of interlocking debt.
They do not have the money to spend or the desire to spend, so there
won't be hyperinflation. You have a clue what's going on when the
federal government is tying its bailouts to requirements to spend. If
the government has to force people to spend there won't be inflation.
If people won't spend, then there'll be deflation, the opposite of
inflation.
That was the problem before the COVID-19 plague. Multitudes have lost their jobs suddenly; those who have jobs find that there is much less to buy because the stores selling such things are closed. So guess what happens? The consumer economy gets a double-whammy. Know well: the securities market was in a speculative boom as late as February and that came to an abrupt end. It is best that unemployed people be expected to spend. A problem: people discover that they can do without much of the spending that they used to do with little thinking -- like mindless gambling, going to restaurants for indifferent food, bar-hopping, and impulse purchases.
OK, this is a good time to do labor-intensive household improvements such as painting and gardening, or trying one's hand at creative activities. People may find themselves abandoning one set of activities for another.
Much consumer debt will have to be written off. Securities values look based on the Dow this weak to be on the brink of recovery -- if they aren't in a sucker's rally. I have my prediction that after the current economic meltdown and during the transition to a 1T that we will go from a debt-driven economy to something more like a pay-as-you-go economy that fosters saving and investment instead of the borrow-and-spend ethos of 'conservative' Presidents such as Reagan, both Bushes, and Trump. I predict that formal education will lengthen as a norm in communities in which it is now below average (typically the Mountain and Deep South) and that it will be more tax-funded than reliant upon lending to students. I also notice that we are at the apparent end of the line for the era in which we can simply manufacture stuff so that people buy more and achieve bliss. Many of us are inundated with stuff. Just visit a Goodwill store (when those re-open). How much china do you really need? How many recorded movies do you really watch?
Quote:The way the economy will fail is when somebody's margin call or
somebody's bankruptcy triggers a chain reaction of debt payment
failure. That's what a deflationary spiral is, as one bankruptcy
triggers another one. The principle of maximum ruin: The maximum
number of people are ruined to the maximum extent possible. Inflation
is a fantasy.
Inflation and the collapse of speculative bubbles of course get their classic treatment in John Maynard Keynes' General Theory. Inflation can be stopped by taxing the Hell out of the economy. Speculative bubbles lose their attraction and result in severe downturns that require government to spend to put an end to the economic meltdown. We have not had severe inflation for a long time, but we now have the experience of the 2007-2009 meltdown and secondary memories (people who remember the 1929-1932 meltdown first-hand are now extremely rare). The 1929-1932 meltdown did not have consumer debt as a culprit.
Several cycles work together. The Generational cycle of Howe and Strauss suggests that collective memories from eighty years or so earlier vanish, and the restraints that traumatized kids from the time placed on doing the very things that those kids dreaded from the time lose their constituency as the once-traumatized kids pass into death and senility and lose their influence upon institutions. Thus the bad habits of the Roaring Twenties become possible again in the Double-Zero decade. A 19-year cycle of the securities markets (peaks to peaks, crashes to crashes, depression troughs to depression troughs, recoveries to recoveries, and speculative frenzies to speculative frenzies) operates... four cycles of nineteen years to twenty years suggests peaks in 1929 and 2005-2007 (if one looks at real estate prices, an economic crash in 1930 and 2008 (the real crash that led to the Great Depression was in 1930)... and roughly eighty years suggest the 3T/4T divide at the relevant times. (Allegedly, 1951, 1970, and 1989 were to be depression years, but other realities muted such). Maybe more relevant this time were the Crashes of 1921 and 2000 to what we are experiencing now. The Skowronek cycle suggests that a political paradigm starts by solving some problems (Reaganomics compelling young adults to reduce their expectations in life and accept dead-end jobs as a permanent solution to their need for sustenance; don't like the pay? Get a second such job to make ends meet!) only to become stale and ineffective as political leaders either can get no more good effects. Skowronek sees Carter and Trump as failures for either riding a dead horse (Carter) or going too far (Trump). The norm of having most people overworked and underpaid on behalf of investors and executives eventually destroys the consumer economy.
The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated Communist but instead the people for whom the distinction between fact and fiction, true and false, no longer exists -- Hannah Arendt.
