With all due humility my recognition that retail sale is the single universally as in aggregatively participated in/macro-economic point in the entire economic process, and thus is the perfect place to implement a monetary policy utilizing accounting that has resolving macro-economic effects on inflation, purchasing power and demand, and beneficial social, psychological and even spiritual effects as well...is worth something other than a non-Nobel prize in economics.
Considering that retail sale has been going on hundreds of millions of times every day right under economist's noses for centuries, Its also proof that thinking/abstracting, although an excellent way to identify problems, lacks sufficient direct observation to discover solutions...which is a signature of wisdom.
Systemic monopolies are bad enough, but paradigmatic monopolies are far, far worse because it requires the willingness and ability to embrace complete conceptual opposition/paradox and its apparent illogic and one must brush past their own cynicism. But that is what it takes to have a paradigm/lasting change. Helio-centrism vs geo-centrism, cue derisive laughter, nomadic hunting and gathering vs homesteading, urbanization and agriculture, cue condemnation of the witch doctors, Monetary Gifting, cue your own acculturated cynicism...but again, this is the required process of the phenomenon of paradigm change.
To paraphrase one of the world's major wisdom traditions: "Seek ye first the new monetary paradigm, and all these other things will be granted unto you."
Well, that is a new interpretation on me. Most of the analyses I've read on the cause of the Great Financial Crisis have been focused on over-leverage, especially in the mortgage derivative markets, where, when due diligence of some outsiders caught up with the leverage pyramid, those over-extended could not meet margin calls and the panic was so great, especially around the extent of AIG's involvement with so many major lenders. The evaluations of worth of financial products, widely distributed, MBSs to be precise changed so rapidly that trust evaporated freezing the REPO markets along with most others. After this Great Event, one could argue that the role of the Federal Reserve has taken all the worries - such as those over rising interest rates - off the table. The higher rates today gives the Fed the leverage to reduce rates should there be recessionary signals, something everyone worried about during the days of minus i's. It's all under control, isn't it Ann? Keep calm and carry on, some might say, there will never be another GFC. (Little bit of tongue in cheek there.) I might add, and I hope to write about this in the near future, the great run of stock prices and market killings from March of 2009 until Covid in March of 2019 - touted as the longest without a recession in recorded economic history (by the Economist most famously) besides giving great cover to the Great Trump, and now the "great" Biden since 2020, also has deflated social democrats and democratic socialists through the West, whose only available "crisis" is the great maldistribution of wealth highlighted by the RAND study which managed to get in Time Magazine for its Sept. 2020 election cycle - the transfer of 51 Trillion dollars upward to the ten percent since 1975 (through 2018) - which was never mentioned by either of the two candidates, or parties. Tough set of signals for the left, especially the very low unemployment numbers; they (the left) have a lot of trouble coping with the higher inflation, having no available tools that mainstream economists will except (my recommendations not being accepted).
I've been thinking about your response and I half-agree. Here are my reservations. In the example I cited about mortgage backed securities and their valuation at the height of the financial crisis, it is true they they became the rage in finance based on a bubble in the US housing market, rising home values to heights never seen before.
Dean Baker always reminds us he saw that bubble before others...and many now claim they did - Baker did, no doubt. In the sense that mortgages are debt, there would be the direct connection to your post Ann, but they are not counted as debt on bank balance sheets are they? and please correct me if I'm wrong. And they were then marketed by the big banks as an "asset," paying what...8-12% rates depending on the mix in the MBS "budle." So where, if they are positive loans on bank balance sheets, and assets at Morgan Stanley and Goldman, and Lehman Bros...where did they register as "debt"? (Consumer debt I guess - but isn't home ownership everyone's bragging point?) My point is that the whole process behind the key instruments in the GFC were not appearing as traditional debt statistics, the way my credit card debts and the nation's figure so prominently, so closely watched, including default rates. It was was only when "diggers" in The Big Short began looking at the quality of "mortgage loans" lent and the inability of borrowers to pay, the "No income, no job, no assets" the infamous "NINJA" loans, that it all collapsed.
I've been on the lookout, as so many on the left have as well, looking for the next big bubble, but alas, only a sigh as candidate after candidate did not trigger any big stock shock, until COVID, an "exogenous" event, did in 2019.
The "candidate" bubble most often mentioned today is "commercial real estate," and its vacancy rate, but that sector seems to me, jump in critics, always, more than other sectors, like credit card debt, very much under the influence of "extend and pretend" where the due dates on the original loans are revised or ignored. I guess you could say that the commercial real estate investors get a better deal than the homeowners who were foreclosed upon in the wake of the GFC, some 10 million according to the number which seems to stick in my head. Some scuba divers who are "under water" get fresh air tanks while others are pulled to the surface before being evicted.
It would be a useful exercise to do an essay/book called "Looking for the Next Bursting Bubble - a history of bubbles that didn't burst, 2009-2024...? "
$100tn annual GDP bonused at 0.01 bps is $100 bn in the pockets of bankers, brokers, lawyers and their associated politicians.
Sad part is taxpayers mitigate these risks through public safeguards, such as central bank lending, deposit insurance and financial regulation. All of which is risk mitigation funded principally from industry income. After which it's all public bailout.
In fact, put industry risk expense in the numerator and your estimate for total debt sales in the denominator, and the result begins to look more like a premium payment. We are nowhere near +99% compliance.
Never understood why taxpayers are in the financial insurance business or why party insiders are qualified to have a say in choosing the best risk wholesalers. Mark Carney was full City first.
Make bankers eat their own pudding. Reward banks for keeping business in house and for staying on the books. Taxpayers and the world economy will do better.
Just for clarity, in my thinking, is debt based on 'what people expect' as in if you make a loan and expect to have it paid back, rather than anything more concrete - is the problem that if investors are dissapointed they didn't get what they expected then they stop making loans and this causes a drop in the availability of finance?
The problem is if you have a monopoly paradigm for the creation and distribution of new money of Debt Only as in Burden to Repay, as private finance does, you inevitably have financial crises caused by the continual build up of PRIVATE debt. The solution is a new monetary paradigm of Direct and Reciprocal Monetary Gifting strategically integrated into the Debt Only system, and rational and enforceable regulation of finance so it doesn't take leave of its moorings with "weapons of mass economic destruction" as it has serially done in the past.
I guess I was thinking in terms of comparison to a crisis of natural resources, eg there was a water shortage or a virus that diminished human intelligence so we no longer had the ability to produce certain goods, that would be a real physical shortage but a financial crisis is an abstract crisis where there is no diminishment in resources and no diminishment in our ability to turn those resources into goods and services, but somehow we go into a crisis state as if that were the case
With all due humility my recognition that retail sale is the single universally as in aggregatively participated in/macro-economic point in the entire economic process, and thus is the perfect place to implement a monetary policy utilizing accounting that has resolving macro-economic effects on inflation, purchasing power and demand, and beneficial social, psychological and even spiritual effects as well...is worth something other than a non-Nobel prize in economics.
Considering that retail sale has been going on hundreds of millions of times every day right under economist's noses for centuries, Its also proof that thinking/abstracting, although an excellent way to identify problems, lacks sufficient direct observation to discover solutions...which is a signature of wisdom.
Systemic monopolies are bad enough, but paradigmatic monopolies are far, far worse because it requires the willingness and ability to embrace complete conceptual opposition/paradox and its apparent illogic and one must brush past their own cynicism. But that is what it takes to have a paradigm/lasting change. Helio-centrism vs geo-centrism, cue derisive laughter, nomadic hunting and gathering vs homesteading, urbanization and agriculture, cue condemnation of the witch doctors, Monetary Gifting, cue your own acculturated cynicism...but again, this is the required process of the phenomenon of paradigm change.
but the pirvate debt/gdp in the US seems much lower compare to the 08 period
The above post refers to global debt to gdp....
To paraphrase one of the world's major wisdom traditions: "Seek ye first the new monetary paradigm, and all these other things will be granted unto you."
Well, that is a new interpretation on me. Most of the analyses I've read on the cause of the Great Financial Crisis have been focused on over-leverage, especially in the mortgage derivative markets, where, when due diligence of some outsiders caught up with the leverage pyramid, those over-extended could not meet margin calls and the panic was so great, especially around the extent of AIG's involvement with so many major lenders. The evaluations of worth of financial products, widely distributed, MBSs to be precise changed so rapidly that trust evaporated freezing the REPO markets along with most others. After this Great Event, one could argue that the role of the Federal Reserve has taken all the worries - such as those over rising interest rates - off the table. The higher rates today gives the Fed the leverage to reduce rates should there be recessionary signals, something everyone worried about during the days of minus i's. It's all under control, isn't it Ann? Keep calm and carry on, some might say, there will never be another GFC. (Little bit of tongue in cheek there.) I might add, and I hope to write about this in the near future, the great run of stock prices and market killings from March of 2009 until Covid in March of 2019 - touted as the longest without a recession in recorded economic history (by the Economist most famously) besides giving great cover to the Great Trump, and now the "great" Biden since 2020, also has deflated social democrats and democratic socialists through the West, whose only available "crisis" is the great maldistribution of wealth highlighted by the RAND study which managed to get in Time Magazine for its Sept. 2020 election cycle - the transfer of 51 Trillion dollars upward to the ten percent since 1975 (through 2018) - which was never mentioned by either of the two candidates, or parties. Tough set of signals for the left, especially the very low unemployment numbers; they (the left) have a lot of trouble coping with the higher inflation, having no available tools that mainstream economists will except (my recommendations not being accepted).
To be 'over-leveraged' is to be over indebted...
I've been thinking about your response and I half-agree. Here are my reservations. In the example I cited about mortgage backed securities and their valuation at the height of the financial crisis, it is true they they became the rage in finance based on a bubble in the US housing market, rising home values to heights never seen before.
Dean Baker always reminds us he saw that bubble before others...and many now claim they did - Baker did, no doubt. In the sense that mortgages are debt, there would be the direct connection to your post Ann, but they are not counted as debt on bank balance sheets are they? and please correct me if I'm wrong. And they were then marketed by the big banks as an "asset," paying what...8-12% rates depending on the mix in the MBS "budle." So where, if they are positive loans on bank balance sheets, and assets at Morgan Stanley and Goldman, and Lehman Bros...where did they register as "debt"? (Consumer debt I guess - but isn't home ownership everyone's bragging point?) My point is that the whole process behind the key instruments in the GFC were not appearing as traditional debt statistics, the way my credit card debts and the nation's figure so prominently, so closely watched, including default rates. It was was only when "diggers" in The Big Short began looking at the quality of "mortgage loans" lent and the inability of borrowers to pay, the "No income, no job, no assets" the infamous "NINJA" loans, that it all collapsed.
I've been on the lookout, as so many on the left have as well, looking for the next big bubble, but alas, only a sigh as candidate after candidate did not trigger any big stock shock, until COVID, an "exogenous" event, did in 2019.
The "candidate" bubble most often mentioned today is "commercial real estate," and its vacancy rate, but that sector seems to me, jump in critics, always, more than other sectors, like credit card debt, very much under the influence of "extend and pretend" where the due dates on the original loans are revised or ignored. I guess you could say that the commercial real estate investors get a better deal than the homeowners who were foreclosed upon in the wake of the GFC, some 10 million according to the number which seems to stick in my head. Some scuba divers who are "under water" get fresh air tanks while others are pulled to the surface before being evicted.
It would be a useful exercise to do an essay/book called "Looking for the Next Bursting Bubble - a history of bubbles that didn't burst, 2009-2024...? "
$100tn annual GDP bonused at 0.01 bps is $100 bn in the pockets of bankers, brokers, lawyers and their associated politicians.
Sad part is taxpayers mitigate these risks through public safeguards, such as central bank lending, deposit insurance and financial regulation. All of which is risk mitigation funded principally from industry income. After which it's all public bailout.
In fact, put industry risk expense in the numerator and your estimate for total debt sales in the denominator, and the result begins to look more like a premium payment. We are nowhere near +99% compliance.
Never understood why taxpayers are in the financial insurance business or why party insiders are qualified to have a say in choosing the best risk wholesalers. Mark Carney was full City first.
Make bankers eat their own pudding. Reward banks for keeping business in house and for staying on the books. Taxpayers and the world economy will do better.
Important cautionary debt statement today
Just for clarity, in my thinking, is debt based on 'what people expect' as in if you make a loan and expect to have it paid back, rather than anything more concrete - is the problem that if investors are dissapointed they didn't get what they expected then they stop making loans and this causes a drop in the availability of finance?
Its often more than 'expected'...It is mostly contracted and underpinned by law.
The problem is if you have a monopoly paradigm for the creation and distribution of new money of Debt Only as in Burden to Repay, as private finance does, you inevitably have financial crises caused by the continual build up of PRIVATE debt. The solution is a new monetary paradigm of Direct and Reciprocal Monetary Gifting strategically integrated into the Debt Only system, and rational and enforceable regulation of finance so it doesn't take leave of its moorings with "weapons of mass economic destruction" as it has serially done in the past.
I guess I was thinking in terms of comparison to a crisis of natural resources, eg there was a water shortage or a virus that diminished human intelligence so we no longer had the ability to produce certain goods, that would be a real physical shortage but a financial crisis is an abstract crisis where there is no diminishment in resources and no diminishment in our ability to turn those resources into goods and services, but somehow we go into a crisis state as if that were the case