Sunday, October 21, 2012

Broke dicks need time or money.....

Depression over as soon as the consumer comes back. Eliminate the debt, give a humongous tax break or send everybody a check.


PRAGMATIC CAPITALISM – Krugman: Household Debt is the Problem, not the Banking System

Richard Koo’s work where he formally called this idea the “Balance Sheet Recession” and long before we ever came up with Monetary Realism and the importance of understanding why “inside money” rules the monetary roost: “So, the government has a partially correct solution. Not the BEST solution, but it gets to the core of the credit issues. They will essentially trade the bad paper for good paper and it will alleviate many of the pressures on the banks. As I have written here many times the banks are the lifeblood of the system.  I like to think of the banks as the oil in the engine.  If you run out oil the system begins to break down and eventually the engine stops running.  You can’t have a healthy functioning economy if the banks aren’t lending.  Unfortunately, because this won’t fix any problems at the household level it won’t induce any borrowing.  So, it’s a clever way to resolve the banking crisis, however, it doesn’t fix the root of the problem which is at the household level.  So, again I ask – is this a “bailout”?   You bet your ass it is.   Unfortunately, it’s not a bailout of the entire system.  It’s just a bailout of the banking system.  And their problems are merely a symptom of much bigger problems at the household level.”

No comments: