Monday, September 12, 2016

Assets, debt and Ponzi

Stop the Fed before it kills again

This is about US corporations and stock markets. But the mechanisms apply to any asset market including of course housing. Despite poor earnings US corporations are loading up on debt, using their (current, temporary) creditworthiness / collateral, to pay out dividends and buy back shares to boost their price. But households and consumers are not borrowing enough to boost demand, and corporations aren't investing productively. The Titans of 'industry' are devouring their own children to enrich themselves and impoverish everyone else. The Titan Cronus devoured his own children so that none would dethrone him - but in the end they did.

Posted by icarus @ 09:17 AM (3735 views)
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2 thoughts on “Assets, debt and Ponzi

  • Using debt to buy existing assets (shares, land, homes) isn’t good – just inflates their value and doesn’t create anything. Debt to create new stuff, e.g. buy a new industrial machine, a car, build a home, actually creates something. How you incentivise the latter and discourage the former is a tricky question and no doubt one that accountants and lawyers would walk all over…

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  • capital gains tax.
    land value tax.
    “window guidance” on credit creation.
    credit controls.

    Just a few means that have been used or proposed to curb this problem; there must be others.

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