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leicestersq

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Everything posted by leicestersq

  1. A growing percentage though, and it is at the margins that prices are determined.
  2. Why no use complaining? They spend more than they earn, that is profligate. They spend so much more that even regressing to 2000 levels isnt enough to bring them into balance. I am of course, in favour of a default, then Greek levels of expenditure will fall much much more, before recovering. I am not sure how you can say that. The Troika are going to give Greece more money to finance it's deficit. Cuts will be a lot harsher if they dont get that extra money. At least in the short term. As for asset stripped, what do you mean? If you can only get more money lent to you if you mortgage your house, and you borrow and lose your house, you have only yourself to blame. Greece can simply walk away and default on 220 billion of debt if it wants to and there is nothing anyone can do about it, no assets can be stripped, all that lending is unsecured. I view Greeks indebtedness as a crime, they borrowed with little intent to repay. What they (the crooked politicians mostly) have done to the lenders is barbaric.
  3. Can't the private sector do that? Of course the price may be different, but if you want an assured tenancy, you can get one can you not?
  4. Falling rents, great news. Why is there a need for social renting if the private sector can provide at the same price?
  5. People do spend money on stuff where prices are falling. Would they spend more if they were not? I know many people delay their purchases, but at some point you realise that the time spent waiting for further prices falls is a cost to you of not having the pleasure of the item you seek. Deflation, as defined by shrinking money supply, is different to the deflation you are talking about. It is this that those in power worry most about. If that happens, through a shrinking in total credit, less stuff will be bought as there is less money (ok, I am making assumptions about money velocity but it probably wont be increasing in such a scenario). A factory that produces stuff may be financed with debt, and the fall in its pricing power may mean it is no longer viable because it cannot service the debt. If it goes into liquidation, its productive capacity is lost, as is the debt money financing it, as is the confidence of the previous workers there and those around them, which can lead to a further drawing in of ones horns.
  6. By which you mean, for individuals those who spend everything they get end up poor, those who save end up rich. For economies though, if people are spendthrift by nature generally, the economy becomes wealthy, but for a nation of thrifts, the result is national poverty. An economy in the long run, is only as big as its ability to consume.
  7. JustYield, What I think a proper government should do, if inflation takes hold, is QT, quantitative tightening. That would be running a fiscal surplus, ie tax more than spend, and with a portion of the surplus, cancel that money. I guess you are right, in a system with even mild but sustained inflation, at some point you are going to have to cross off a few zeroes, such is the laws exponential growth.
  8. Everyone agrees that if you print too much, for an economy that is at close to productive capacity, you just get inflation, I think I said that before. It is what happens when an economy is well below full capacity. As for the introduction of a sly extra pound coin, well in the past that did happen. What was the affect? The money did stimulate new production and enabled people to buy and exchange new products. Would the economy have grown anyway without new money being introduced at all? I say to the Austrians, if you are right, lets just take away all the money and see what happens, your model suggests that the real economy will be unaffected.
  9. That is easy. Government bonds are government debt. You should only monetise this. And let me point out my distaste for the current method of monetising this in the open market. The only proper way to monetise is for the state to print to make up a portion of any deficit it is running. Buying in the open market gives free money to bankers, and is somethign I find repugnant. Yes, the multiplier effect. This is what you want to happen, for the new money to circulate. Well I dont support the monetisation of private debts in any way. The current government is monetising the debts of equitable life, and RBS and HBOS. It has the power to do this, and I oppose it all. Only if the government chooses to do so. That newly printed money can be used to pay off other debts though, is this what you are talking about? I would hope that any government exacts a good bargain for any money it spends. I know it doesnt always do that, but government corruption and largesse is another discussion.
  10. This is the point though, if you use that money you have printed properly, you can end up with 11 loaves, not 10. Austrian economists believe that if you print money, output remains unchanged. I dont buy that argument.
  11. Money is given value by what it can buy you. In the UK, notes and coins are not backed by anything other than the state being willing to accept money as payment for tax. This though, means that the money is generally acceptable as payment for all things. Does printing money devalue it? Not always. Sometimes a little more money can stimulate more production than there would otherwise have been, making it more valuable than before.
  12. Money printing can be part of a socialist redistribution, but that isnt all it can do. Changes in the money supply can have a dramatic affect on the real economy of trade, goods and services. Austrian economists often argue that this is not the case, but I find the argument difficult to accept. The contracts and laws that underpin our trade systems, are not flexible in a backwards direction. Bank accounts alone are a good example of this. If banks reduced the amount of cash each depositor has as the value of its loans goes down, there would immediately be a run on all the banks, and credit would just dry up. Few would argue that credit isnt vital to a modern economy. Those nations that have developed sophisticated means of advancing and controlling credit, have become wealthy. Other nations that dont use it have found it difficult to develop.
  13. You have lost me there. I did point out that in the UK in the 1930's, loose monetary policy was used to build up our armaments to oppose such policies. And where did I state that there would be no bankruptcy? Private debts should never be monetised in my book, I was only talking about the state monetising it's debt. That means there could be bankruptcies as always. I have never seen anyone argue successfully against it. Not at all, winners and losers remain. Remember, private debts should not be monetised. That isnt necessarily true. Deflation can destroy an economy, reducing the wealth of everyone. What would happen to the UK economy if you took 50% of the money out of it? It would grind to a halt and civil society would break down. Got lots of money saved up have you? It wont get you much if our productive capacity seizes up. I thought I was opposed to inflation, did I not make that clear? Where did this come from? I was arguing that judicious use of monetary policy can help improve the wealth of the nation. There is no wealth if people dont work and opt out of the system, I never advocated that. What you are talking about here is the use of the government to take money from workers and give to non-workers. This is an entirely different argument.
  14. Well yes, we are talking about monetising government debt, which is a pledge against the taxes raised on future production. Instead of it being a debt for the future, you increase the supply of money now with something that has no debt (debt being defined as something you can extract payment for in a court of law). Whether or not that is a good choice depends on the circumstances, but it isnt always a bad choice. I am not sure what relevance 'monetising wealth' has in this debate.
  15. There are different definitions of inflation. The most common one is the devaulation of money versus goods and services, also known as price increases. Another definition is an increase in the money supply. The main difference between the two is that one doesnt take account of changes in the aggregate supply, so money and production can increase in step with no price level change. The thing about inflation is that whichever definition you choose, it doesnt create on its own, a crushing burden of debt that can bring a halt to productive output. The biggest danger is that a generally rising money supply can cause the misallocation of resources as people make the mistake of overvaluing the money they receive in return for the good or service they provide. Hyper-inflation is somewhat different, where people no longer wish to hold a certain currency at all.
  16. Toto, I trust you have considered the paradox of thrift. If you let a deflationary collapse occur, those who have savings will watch them disappear. Savings are only worth something if you have a productive economy to give those savings value. Replacing government debt with cold hard debt free cash, can help maintain a productive economy, whereas letting the whole thing slip into deflation can destroy that productive economy. Remember with deflation, debts have to be written off through bankruptcy. It is that process which destroys life savings, be it in cash at the bank or equity in the now defunct factory. Seeing yours and other people's saving disappear doesnt do much to motivate people to work hard and invest for the future.
  17. I think that there is a world of difference between war reparations and lending more money to Greece. Greece has proven itself to be incredibly untrustworthy. It is currently spending far more than it is taking in through taxation, and fears a meltdown in its society if it were to be forced to balance the books. Therefore Greece is doing what it has always done, and is lying to get more cash. It is prepared to get the whole parliament to tell this lie. Whether or not creditors are willing to pump more money into this dead duck is anyone's guess. Those lending to it fear a complete meltdown of the Western banking system if Greece is left to default. As a compromise they are offering to extend more money, but only on very strict conditions. As Greeks have shown that they cannot manage their own country, those strict conditions have to be intrusive. It is an ugly compromise, and doomed to failure. At some point you just have to turn your back on serial deceivers and put a line under your losses.
  18. Are you sure that is always true? When the UK came off the gold standard and was able to print new money in the 1930's we did relatively well compared to the rest of the world. What we are talking about here is turning government debt into money, either notes and coins or central bank credit. Private debts remain. Whether or not it is a good thing is how the process is undertaken. I dont buy the moral argument about it destroying the incentive to work, though if someone could elucidate what they mean by that, I would be prepared to change my mind if the argument is sound. Printing money can help an economy if it faces deflation. What we really mean by a healthy economy is one where people can trade and produce things. If you have deflation, people stop trading, and stop trusting each other. Factories and organisations can become insolvent, not because what they produce isnt wanted, it is just that people wont risk buying and selling the things it produces. Replace that debt with money, put it into peoples hands, they suddenly feel more confident and go out and buy things and that confidence suffuses through the entire economy, and keeps the productive capacity of the economy going. There is always a risk with the policy though. Print too much, and if the productive economy cannot supply the new demand, inflation can start. If prices start rising quickly, and banks who find that they are being asked for more and more loans start supplying those loans, you can get an explosion in the money supply and balancing explosion in prices. If people see the state continuing to monetise the debt or printing to finance deficit spending, inflation can destroy the currency itself. So it can work, it can help delever the economy, replacing borrowed money with cold hard cash. Steve Keen has been putting forward policies to help with this process. It isnt a risk free option though.
  19. My guess is that you mean that landlords are buying more properties out of cashflow that they generate by renting out to HB claimants and immigrants 10 to a room, crowding out the indigenous population from the marketplace?
  20. And so the madness goes on. Bondholders aren't going to accept haircuts, so there is going to be a default anyway. Why don't they just do an Iceland and take the pain? I guess the crooks must still be in charge.
  21. Yep. Iceland bankers pulled the same stunt. Borrowed money, used it to buy UK assets, and then defaulted having done just enough to keep ownership if the assets, or so they thought. Some were right to think that. Germany is just a victim here, to another international sized borrowing scam. Lots of Greek people are victims too. Britain put pressure in Iceland to go after the crooks. A lot of this posturing is to get the Greeks to do the same.
  22. That wouldn't surprise me. This money was borrowed to be stolen, the amounts are too large for any other explanation. Some in Greece who were in on it will be very rich with overseas bank accounts. Others are going to become very poor with no jobs, cos their banks have no money, and no social security for obvious reasons. People in power looted the nation, and overseas investors to boot. What is really needed is someone to take over, find the criminals, lock them up and seize whatever assets can be found off of them.
  23. No, it is unsecured. They may pledge assets to get some more money though. Thing is, if they do that and fail to pay, will they hand those assets over willingly? The Greeks haven't built up much trust.
  24. Your explanation makes no sense to me. Usury is where you can lay claim to someone else's labour, normally as a result of a money deal that charged someone interest at a rate such that you reap many times the initial amount forwarded as interest. In Greece's case, the creditors aren't going to get their money back. All lending to a sovereign nation is unsecured and repayment is only made by the grace of the borrower. Greece has wilfully borrowed more than it could ever have repaid, and it is the lenders who have taken a bath. There isn't a prayer of there being any net flows of cash out of Greece to lenders. Usury normally entails some sort of repayment.
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