Topic: Economy, what's left of
Economy 101 according to Hamou, who is apparently an Economist in Israel:
1.) were hosed
2.) were hosed
3.) were hosed.
Simple, aint it? Were between "The Crash" and "Deep Depression."
The world economy has descended into a Liquidity Trap from which it will not recover. There was an admission, finally, on netWORTHLESS TV last night that construction jobs have been lost that will NEVER RETURN.
Y'see, the economy was based on inflated, baseless valuations of goods and services (as much as we can steal) which raised price levels. Theres NOTHING at GOOGLE thats worth $600 a share for COMMON STOCK.
Since people couldnt afford goods/services, they had to use CREDIT to buy on "time." That was the old phrase - " I need to buy on time" That used to mean a consumer having credit with a merchant. Now its been corrupted to "credit with a bank."
When prices went crazy (real estate, for example) and money went tight, people and companies that could not afford payments went bankrupt. They werent paying on the goods, they were paying on the INTEREST.
This makes things worth what the interest on them is, and since interest is zero, things are worth- umm, shit or shinola, pick one. It's a wash.
The Liquidity trap is the fact that banks make money on lending with interest. Now the goods arent good because the interest isnt good, no one can sell goods, and there is no one to buy over-priced goods because no one has any MONEY. They cant get credit because their credit is wrecked because they couldn't even pay interest. And now they are too poor to pay ATTENTION. Don't worry about not being able to see who they are, that will become MOST evident when they stat going HUNGRY.
Since interest rates are zero, banks cant lend for two reasons:
1.) cant make any money, cant assume risk, for no return
2.) banks know interest rates have to increase in the future, so they wont lend now. Why would YOU loan 450,000 for a house at Prime + 5 or 5.1% if prime/LIBOR (whichever) will go to 10%? Do YOU want to be hung out to dry for -5 to -10% for 30 years?
The "trap" aspect is that if there's no lending, and business and Government cannot operate a positive balance and can only exist on CREDIT, then no lending and no business recovery.
The shadow Gov't at the Federal reserve cannot raise interest rates, so the banks can make money (see anything illogical in that statement?), because raising interest rates raises price levels and people/businesses cant afford to buy now that there's no credit to buy on. Catch - 22 to the 10'th power. STALEMATE, in Chess.
The purpose of the Fed, under macro-economic theory, is to control/manipulate/manage the money supply to keep the economy from making wild swings. If they weren't MANDATING interest rates, then the banks could raise rates on their own, just like car makers could raise fuel economy figures if the Govt wasn't manipulating them to low levels through CAFE standards. Realize the 'hold' over the banks allowing them to manipulate rates stems from the banks using "their" money.
Look up something known as the "crowbar laws of 1855" in your spare time.
Please don't fall for the "economy is recovering" lie the Gov't is telling the Media to tell you, "recovery" means "going back to where it started from." 450,000 jobs lost this month versus 550,000 last month IS NOT RECOVERY- its a little less disaster. Recovery from the flu is not just reduced fever, its ridding the body of the virus which caused it, restoring it to the previous state of health.
Watch the video "F**k the Fed" on yield-curve and notice the photos. Notice the man holding the hot steel bar with GLOVES? This is what an economic collapse looks like.
