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Si1

Asset Prices Are A Matter Of Government Policy Whereas Debt Is Subsidised

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Thinking back to Mervyn's king's well known statement from 2005ish, I think, "asset prices are a matter of opinion whereas debt is real".

He was just plain incorrect want he. See my op title.

Edited by Si1

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And the legendary "this is not a liquidity crisis, it is a solvency crisis".

And then proceeded to supply so much liquidity that asset prices rose, banks were made whole and the solvency crisis abated.

Reiterated this year by Mervyn in an opinion in the telegraph

http://www.telegraph.co.uk/business/2016/02/26/lord-mervyn-king-why-throwing-money-at-financial-panic-will-lead/

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It was a tale of two epochs in the first growth and stability, followed in the second by the worst banking crisis the industrialised world has ever witnessed.

He still doesn't ******ing get it.

No mervyn, 1996-2007 was the crisis. It was, in Britain at least, an era of hyper inflation, falling living standards, debt slavery and mortgage fraud.

At least two bubbles were pumped up; both collapsed. The banking industry need to be saved from collapse twice. Mass immigration radically changed the face of the U.K.

It sure as hell wasn't stable.

Edited by BuyToLeech

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He still doesn't ******ing get it.

No mervyn, 1996-2007 was the crisis. It was, in Britain at least, an era of hyper inflation, falling living standards, debt slavery and mortgage fraud.

At least two bubbles were pumped up; both collapsed. The banking industry need to be saved from collapse twice. Mass immigration radically changed the face of the U.K.

It sure as hell wasn't stable.

+1

There was no NICE decade. The Great Moderation that the likes of Bernanke and Blanchard used to congratulate themselves over was as much a product of the debt ponzi as the Great Recession in 2008. A simple complex systems model of the economy reveals this explicitly:

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He was just plain incorrect want he. See my op title.

It's an aphorism.

An asset price reflects a view as to the future, and the future is not known.

A debt is denominated in nominal, must be serviced and will one day fall due. Whilst its real value twenty years hence cannot be known, the nominal values are all nailed down.

Take somebody with a massive interest-only mortgage, £250,000 say, against a property which today's market says is worth £400,000.

If the market corrects by 40% over the next two years it will be clear what King meant by his aphorism, regardless of how cheap it is to service the debt.

The problem for anyone trying to 'play' the market is that we have a chronic crisis and thus it's willingness to play out against a timescale which suits a given individual's needs cannot be taken as read.

Just because prices are a matter of opinion and debt is real, that doesn't mean that the debt free are on easy street and the debt laden are irredeemably f**ked. The whole thing is a mess, you just pick your poison.

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