I have a question for those of you smarter than me about the economy...

[cbirch2]

SO you agree you are one dumb motherfucker. That's a good sign.
The gov't does not have infinite borrowing capacity. We already have experienced a downgrade with others on the way. Your plan will render our bonds junk and financing will be difficult.
Your plan makes too big to fail and moral hazard enshrined in our systems. We will face the same crap again in 10 years, as companies figure the gov't will just bail them out. They will start making loans that will make subprime look like triple A credit loans.
That isn't a cure. That's worse than the disease.
The actual way to cure this is to arrange an orlderly liquidation of property via another RTC type corporation with an actual drop dead date. Quit threatening to sue the banks and give them immunity on foreclosure proceedings. Some banks will go under. Others will survive.
Going forward make clear we will not bail out anyone. Remove FDIC guarantees of savings deposits and make banks publish clear statemens of their financial condition.

You sound like a child when you insult people. Actually you sound pretty retarded in this situation.

But i realize that the government does not have infinite borrowing capacity. Thats why i said that the government should do this until the bond market signals, through rising interest rates, that it is becoming less interested in financing debt.

But your claim that the bond market will rate our bonds as junk is bullshit. Rates on treasury bills are at record lows, the market has been more than willing to finance US debt. The S&P downgrade was a result of pessimism about our political situation. It was a statement that S&P feels that its less likely we need to make the changes now to not have a debt problem in the future.

We do not have a debt problem right now, not as far as the people buying the debt are concerned.

If you simply allow collapses you lose real wealth. Do you know anything about fractional banking? A bank leverages its assets. Letting a bank collapse and then liquidating its assets will cause a loss in real wealth because the amount of its assets are less than the amount people have in checking accounts there, this is the difference between M0 and M1.

Just because you know big words like liquidity doesnt mean your right. You dont know how the fractional banking system works.

OK so first you say that we dont have infinite capacity to borrow. Then you claim that we do because the market is still valuing our bonds. Of course a good part of that is the flight to safety from European bonds. We are the best of bad alternatives.
I dont know what you are calling "real wealth." As opposed to, Fake wealth? Ersatz wealth? Paper wealth, which is all that bank loans are. Is real wealth destroyed when bank loans are called or is it destroyed when the loan goes bad?
Your posts are a muddle of half truths, untruths, poor English, and plain confusion. I'll bet you're an Obama voter.

Again, i still havent said we can spend infinitely. I said we can spend MORE. Yields on treasuries are low, so the bond market would be perfectly willing to finance a higher level of government spending, not an infinite one. Eventually if we spend too much yields will rise, but were far from that point right now. In september yields hit record lows.

"Real" as opposed to "Nominal". Those are two basic economic terms you should learn....

But im just trying to say that because of our fractional banking system, in which banks leverage their assets to issue loans, the amount of actual assets in the bank is less than the amount people have deposited.

The difference between the assets of the bank and the money in its checking accounts, the difference between the monetary base measures M0 and M1, is real wealth as opposed to nominal wealth, as conservatives seem to think it is.

So if you let a bank collapse you can liquidate its assets, but its depositors will still lose most of their money. that money is real wealth that has vanished with the trust of the bank, as opposed to just nominal wealth created by trickery.

 

[cbirch2]

And no, my posts are not half truths or bad grammar. Maybe i should just stop using words like "assets", "equity", and "leverage". i think they confuse you.

 

[The Rabbi]

And no, my posts are not half truths or bad grammar. Maybe i should just stop using words like "assets", "equity", and "leverage". i think they confuse you.

No your ignorance confuses me. And your atrocious English.
Woudl you care to define the nominal as opposed to real assets of a bank.

 

[cbirch2]

And no, my posts are not half truths or bad grammar. Maybe i should just stop using words like "assets", "equity", and "leverage". i think they confuse you.

No your ignorance confuses me. And your atrocious English.
Woudl you care to define the nominal as opposed to real assets of a bank.

"Woudl you care to define the nominal as opposed to real assets of a bank."

My point is that both sides of the balance sheets are real. There isnt nominal wealth in a simple fractional banking system. But advocates of liquidation seem to think there is no difference between letting the bank fail or it staying successful, because the assets can be sold off. But thats wrong, totally wrong.

Thats treating the difference between the depositors money and the banks assets as if it isnt real wealth. I was trying to dispel that notion.

So maybe nominal was a bad choice of words. But the point remains. Liquidation is generally a bad idea when your talking about a bank.

 

[Remodeling Maidiac]

I keep checking in for any pointers and advice.

Should know better.

 

[cbirch2]

I suppose i would be using "real" for what the Federal Reserve calls M0 and "nominal" for what the Fed calls M1.

The point is that even though you dont lose assets in a liquidation, you lose wealth.

Maybe you think im just talking gibberish because you dont understand these words. These are actual definitions you may want to learn.

 

[The Rabbi]

I suppose i would be using "real" for what the Federal Reserve calls M0 and "nominal" for what the Fed calls M1.

The point is that even though you dont lose assets in a liquidation, you lose wealth.

Maybe you think im just talking gibberish because you dont understand these words. These are actual definitions you may want to learn.

I ask what ought to be a simple question and you spend two posts dancing around it. You don't have a fucking clue what you are talking about.

 

[cbirch2]

I suppose i would be using "real" for what the Federal Reserve calls M0 and "nominal" for what the Fed calls M1.

The point is that even though you dont lose assets in a liquidation, you lose wealth.

Maybe you think im just talking gibberish because you dont understand these words. These are actual definitions you may want to learn.

I ask what ought to be a simple question and you spend two posts dancing around it. You don't have a fucking clue what you are talking about.

I know exactly what im talking about. Allowing banks to fail and simply liquidating their assets is a horrible idea. Isnt that the discussion were having here? It preserves M0, but M1 will decrease. If you dont know what those numbers are, thats not my fault.

Money supply - Wikipedia, the free encyclopedia

 

[The Rabbi]

I suppose i would be using "real" for what the Federal Reserve calls M0 and "nominal" for what the Fed calls M1.

The point is that even though you dont lose assets in a liquidation, you lose wealth.

Maybe you think im just talking gibberish because you dont understand these words. These are actual definitions you may want to learn.

I ask what ought to be a simple question and you spend two posts dancing around it. You don't have a fucking clue what you are talking about.

I know exactly what im talking about. Allowing banks to fail and simply liquidating their assets is a horrible idea. Isnt that the discussion were having here? It preserves M0, but M1 will decrease. If you dont know what those numbers are, thats not my fault.

Money supply - Wikipedia, the free encyclopedia

Again you waffle. No answers, just obfuscation.
Allowing banks to keep "zombie loans" on their books disguises their true financial condition. Japan has tried this for a decade and it doesnt work.
Liquidating the bank, selling their assets is painful but the first step to genuine prosperity. Their assets get used to support the next upturn in the business cycle. The debt is wiped out at bankruptcy sales and everyone gets to start over.

 

[cbirch2]

I ask what ought to be a simple question and you spend two posts dancing around it. You don't have a fucking clue what you are talking about.

I know exactly what im talking about. Allowing banks to fail and simply liquidating their assets is a horrible idea. Isnt that the discussion were having here? It preserves M0, but M1 will decrease. If you dont know what those numbers are, thats not my fault.

Money supply - Wikipedia, the free encyclopedia

Again you waffle. No answers, just obfuscation.
Allowing banks to keep "zombie loans" on their books disguises their true financial condition. Japan has tried this for a decade and it doesnt work.
Liquidating the bank, selling their assets is painful but the first step to genuine prosperity. Their assets get used to support the next upturn in the business cycle. The debt is wiped out at bankruptcy sales and everyone gets to start over.

This is exactly why im saying your wrong! You dont understand fractional banking!!

UGH!!!

Banks leverage their assets. So a bank that has $1 billion dollars in assets can have, say, 3$ billion dollars in deposits on its books. The difference essentially comes from the trust in the bank. When you liquidate that bank you let other firms buy those assets, but the depositors would lose $2 billion dollars. That money is GONE.


"The debt is wiped out at bankruptcy sales and everyone gets to start over."

Whose debt? The banks debt will be partially wiped out, although not entirely. But what about the depositors? Because banks leverage their assets, and they dont have enough money to pay out every deposit at once, the depositors lose money that they didnt withdraw.

So who gets to start over? A new bank is allowed to leverage out more loans after it buys the assets, but the depositors from the first bank just saw their wealth literally disappear.

This idea that you need to just let everything fail is bullshit.

If the government had let AIG fail, do you think we would be in a better position today? Because thats absolutely insane.

 

[The Rabbi]

I know exactly what im talking about. Allowing banks to fail and simply liquidating their assets is a horrible idea. Isnt that the discussion were having here? It preserves M0, but M1 will decrease. If you dont know what those numbers are, thats not my fault.

Money supply - Wikipedia, the free encyclopedia

Again you waffle. No answers, just obfuscation.
Allowing banks to keep "zombie loans" on their books disguises their true financial condition. Japan has tried this for a decade and it doesnt work.
Liquidating the bank, selling their assets is painful but the first step to genuine prosperity. Their assets get used to support the next upturn in the business cycle. The debt is wiped out at bankruptcy sales and everyone gets to start over.

This is exactly why im saying your wrong! You dont understand fractional banking!!

UGH!!!

Banks leverage their assets. So a bank that has $1 billion dollars in assets can have, say, 3$ billion dollars in deposits on its books. The difference essentially comes from the trust in the bank. When you liquidate that bank you let other firms buy those assets, but the depositors would lose $2 billion dollars. That money is GONE.


"The debt is wiped out at bankruptcy sales and everyone gets to start over."

Whose debt? The banks debt will be partially wiped out, although not entirely. But what about the depositors? Because banks leverage their assets, and they dont have enough money to pay out every deposit at once, the depositors lose money that they didnt withdraw.

So who gets to start over? A new bank is allowed to leverage out more loans after it buys the assets, but the depositors from the first bank just saw their wealth literally disappear.

This idea that you need to just let everything fail is bullshit.

If the government had let AIG fail, do you think we would be in a better position today? Because thats absolutely insane.

You clearly don't understand much about banking and prove it with every post.
The depositors are covered by FDIC insurance. I happen to think that's wrong, but so what.
The bad loans get liquidated and the underlying assets sold. Yeah, it drives down the value of assets but that's life. The upside is the assets are sold at low values, fueling the next boom.
Supporting unsupportable banks and companies creates moral hazard and in the future you get much more of it, with resulting inefficient use of resources.

 

[cbirch2]

Again you waffle. No answers, just obfuscation.
Allowing banks to keep "zombie loans" on their books disguises their true financial condition. Japan has tried this for a decade and it doesnt work.
Liquidating the bank, selling their assets is painful but the first step to genuine prosperity. Their assets get used to support the next upturn in the business cycle. The debt is wiped out at bankruptcy sales and everyone gets to start over.

This is exactly why im saying your wrong! You dont understand fractional banking!!

UGH!!!

Banks leverage their assets. So a bank that has $1 billion dollars in assets can have, say, 3$ billion dollars in deposits on its books. The difference essentially comes from the trust in the bank. When you liquidate that bank you let other firms buy those assets, but the depositors would lose $2 billion dollars. That money is GONE.


"The debt is wiped out at bankruptcy sales and everyone gets to start over."

Whose debt? The banks debt will be partially wiped out, although not entirely. But what about the depositors? Because banks leverage their assets, and they dont have enough money to pay out every deposit at once, the depositors lose money that they didnt withdraw.

So who gets to start over? A new bank is allowed to leverage out more loans after it buys the assets, but the depositors from the first bank just saw their wealth literally disappear.

This idea that you need to just let everything fail is bullshit.

If the government had let AIG fail, do you think we would be in a better position today? Because thats absolutely insane.

You clearly don't understand much about banking and prove it with every post.
The depositors are covered by FDIC insurance. I happen to think that's wrong, but so what.
The bad loans get liquidated and the underlying assets sold. Yeah, it drives down the value of assets but that's life. The upside is the assets are sold at low values, fueling the next boom.
Supporting unsupportable banks and companies creates moral hazard and in the future you get much more of it, with resulting inefficient use of resources.

OMFG!

For one, the FDIC only insures individual deposits up to $250,000 dollars. So when you have a few hundred billion dollar bank, it doesnt really insure much.

Second! And this is the most important.

You need to learn about the money multiplier.

Not the keynesian one, the the monetarist one. The one taught in Econ 101.

If you liquidate a bank you can recoup as much assets as the bank has, M0. But you do not recoup the total deposits in the bank, M1.

 

[The Rabbi]

This is exactly why im saying your wrong! You dont understand fractional banking!!

UGH!!!

Banks leverage their assets. So a bank that has $1 billion dollars in assets can have, say, 3$ billion dollars in deposits on its books. The difference essentially comes from the trust in the bank. When you liquidate that bank you let other firms buy those assets, but the depositors would lose $2 billion dollars. That money is GONE.


"The debt is wiped out at bankruptcy sales and everyone gets to start over."

Whose debt? The banks debt will be partially wiped out, although not entirely. But what about the depositors? Because banks leverage their assets, and they dont have enough money to pay out every deposit at once, the depositors lose money that they didnt withdraw.

So who gets to start over? A new bank is allowed to leverage out more loans after it buys the assets, but the depositors from the first bank just saw their wealth literally disappear.

This idea that you need to just let everything fail is bullshit.

If the government had let AIG fail, do you think we would be in a better position today? Because thats absolutely insane.

You clearly don't understand much about banking and prove it with every post.
The depositors are covered by FDIC insurance. I happen to think that's wrong, but so what.
The bad loans get liquidated and the underlying assets sold. Yeah, it drives down the value of assets but that's life. The upside is the assets are sold at low values, fueling the next boom.
Supporting unsupportable banks and companies creates moral hazard and in the future you get much more of it, with resulting inefficient use of resources.

OMFG!

For one, the FDIC only insures individual deposits up to $250,000 dollars. So when you have a few hundred billion dollar bank, it doesnt really insure much.

Second! And this is the most important.

You need to learn about the money multiplier.

Not the keynesian one, the the monetarist one. The one taught in Econ 101.

If you liquidate a bank you can recoup as much assets as the bank has, M0. But you do not recoup the total deposits in the bank, M1.

I see reasoning is not your strong point. The FDIC insures deposits up to 250k per account (and it might be unlimited recently, I can't remember all that they did). So if a borrower has 2 accounts with max 250 in each, his money is safe. Anything other than that is companies or people too damn dumb to take advantage of it. I dont know how many people lost deposit money in bank failures over the last 10 years, I would bet it's next to nothing.
You harp on fractional lending like it's esoteric knowledge. It is not. And it doesn't bolster your case, at all.

 

[jillian]

How much insurance coverage does the FDIC provide?

The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.

The FDIC insures deposits that a person holds in one insured bank separately from any deposits that the person owns in another separately chartered insured bank. For example, if a person has a certificate of deposit at Bank A and has a certificate of deposit at Bank B, the accounts would each be insured separately up to $250,000. Funds deposited in separate branches of the same insured bank are not separately insured.

The FDIC provides separate insurance coverage for funds depositors may have in different categories of legal ownership. The FDIC refers to these different categories as “ownership categories.” This means that a bank customer who has multiple accounts may qualify for more than $250,000 in insurance coverage if the customer’s funds are deposited in different ownership categories and the requirements for each ownership category are met(emphasis added)

FDIC: Your Insured Deposits

 

[cbirch2]

You clearly don't understand much about banking and prove it with every post.
The depositors are covered by FDIC insurance. I happen to think that's wrong, but so what.
The bad loans get liquidated and the underlying assets sold. Yeah, it drives down the value of assets but that's life. The upside is the assets are sold at low values, fueling the next boom.
Supporting unsupportable banks and companies creates moral hazard and in the future you get much more of it, with resulting inefficient use of resources.

OMFG!

For one, the FDIC only insures individual deposits up to $250,000 dollars. So when you have a few hundred billion dollar bank, it doesnt really insure much.

Second! And this is the most important.

You need to learn about the money multiplier.

Not the keynesian one, the the monetarist one. The one taught in Econ 101.

If you liquidate a bank you can recoup as much assets as the bank has, M0. But you do not recoup the total deposits in the bank, M1.

I see reasoning is not your strong point. The FDIC insures deposits up to 250k per account (and it might be unlimited recently, I can't remember all that they did). So if a borrower has 2 accounts with max 250 in each, his money is safe. Anything other than that is companies or people too damn dumb to take advantage of it. I dont know how many people lost deposit money in bank failures over the last 10 years, I would bet it's next to nothing.
You harp on fractional lending like it's esoteric knowledge. It is not. And it doesn't bolster your case, at all.

Ok so a company like GE should just create thousands of accounts each with 250k? Thats realistic...

You can create thought experiments all you want, the reality is that accounts at large international investment banks usually have more than $250,000 in them. Just because you think it would be intelligent for every company to just create a bunch of accounts with 250k in them doesnt mean thats a feasible solution.

And i harp and fractional banking because its the basis of the argument. You dont liquidate large banks. Liquidate companies that dont leverage their assets, thats fine. But liquidating banks that have leveraged their assets is usually a bad idea, unless its totally insolvent.

 

[The Rabbi]

OMFG!

For one, the FDIC only insures individual deposits up to $250,000 dollars. So when you have a few hundred billion dollar bank, it doesnt really insure much.

Second! And this is the most important.

You need to learn about the money multiplier.

Not the keynesian one, the the monetarist one. The one taught in Econ 101.

If you liquidate a bank you can recoup as much assets as the bank has, M0. But you do not recoup the total deposits in the bank, M1.

I see reasoning is not your strong point. The FDIC insures deposits up to 250k per account (and it might be unlimited recently, I can't remember all that they did). So if a borrower has 2 accounts with max 250 in each, his money is safe. Anything other than that is companies or people too damn dumb to take advantage of it. I dont know how many people lost deposit money in bank failures over the last 10 years, I would bet it's next to nothing.
You harp on fractional lending like it's esoteric knowledge. It is not. And it doesn't bolster your case, at all.

Ok so a company like GE should just create thousands of accounts each with 250k? Thats realistic...

You can create thought experiments all you want, the reality is that accounts at large international investment banks usually have more than $250,000 in them. Just because you think it would be intelligent for every company to just create a bunch of accounts with 250k in them doesnt mean thats a feasible solution.

And i harp and fractional banking because its the basis of the argument. You dont liquidate large banks. Liquidate companies that dont leverage their assets, thats fine. But liquidating banks that have leveraged their assets is usually a bad idea, unless its totally insolvent.

GE, or any company, does not keep a large amount of its assets in a bank. And they should be able to monitor the bank for soundness. In fact, if they don't they are negligent.
You harp on fractional deposits because you don't know any better.

 

[cbirch2]

I see reasoning is not your strong point. The FDIC insures deposits up to 250k per account (and it might be unlimited recently, I can't remember all that they did). So if a borrower has 2 accounts with max 250 in each, his money is safe. Anything other than that is companies or people too damn dumb to take advantage of it. I dont know how many people lost deposit money in bank failures over the last 10 years, I would bet it's next to nothing.
You harp on fractional lending like it's esoteric knowledge. It is not. And it doesn't bolster your case, at all.

Ok so a company like GE should just create thousands of accounts each with 250k? Thats realistic...

You can create thought experiments all you want, the reality is that accounts at large international investment banks usually have more than $250,000 in them. Just because you think it would be intelligent for every company to just create a bunch of accounts with 250k in them doesnt mean thats a feasible solution.

And i harp and fractional banking because its the basis of the argument. You dont liquidate large banks. Liquidate companies that dont leverage their assets, thats fine. But liquidating banks that have leveraged their assets is usually a bad idea, unless its totally insolvent.

GE, or any company, does not keep a large amount of its assets in a bank. And they should be able to monitor the bank for soundness. In fact, if they don't they are negligent.
You harp on fractional deposits because you don't know any better.

The point is that many accounts in an investment bank are over 250k. You cant just keep creating accounts with max 250k in them. Should someone worth $10 million just create 40 accounts? Thats hardly realistic.

Im not sure what you mean by "harping on fractional deposits". Im not opposed to the system if thats what you think, its very beneficial. But it is vital to the discussion of liquidation of banks. Thats why i keep coming back to it. Assets are recovered but deposits arent....

And even if deposits are insured theyre still lost. it just means the government is on the hook for the losses.

 

[Jackson]

I will check the sites out tomorrow as I'm too tired to bother tonight. Too much food, family, football and movies in one day. Thanks

No answers for you, but wish you the best of luck.

 

[likeabird03]

A lost decade can be looked at two different ways. If you have near zero growth in a ten year period then yes, that could be a lost decade, but that scenario seems somewhat unlikely to me.

However, if you consider the past ten years and exclude the growth we had towards the middle of the decade that later got wiped out. If you consider the fact that today the stock market is at the same level as a decade ago, that home prices are down to their 2000 level, that non-farm payrolls are at the same level as ten years ago - then we've already had a lost decade in a sense.

Then again, if we get to 2016 or 2017 and the economy is still slow then we really would have had a lost decade similar to the first case that I mentioned above.

 

[The Rabbi]

Ok so a company like GE should just create thousands of accounts each with 250k? Thats realistic...

You can create thought experiments all you want, the reality is that accounts at large international investment banks usually have more than $250,000 in them. Just because you think it would be intelligent for every company to just create a bunch of accounts with 250k in them doesnt mean thats a feasible solution.

And i harp and fractional banking because its the basis of the argument. You dont liquidate large banks. Liquidate companies that dont leverage their assets, thats fine. But liquidating banks that have leveraged their assets is usually a bad idea, unless its totally insolvent.

GE, or any company, does not keep a large amount of its assets in a bank. And they should be able to monitor the bank for soundness. In fact, if they don't they are negligent.
You harp on fractional deposits because you don't know any better.

The point is that many accounts in an investment bank are over 250k. You cant just keep creating accounts with max 250k in them. Should someone worth $10 million just create 40 accounts? Thats hardly realistic.

Im not sure what you mean by "harping on fractional deposits". Im not opposed to the system if thats what you think, its very beneficial. But it is vital to the discussion of liquidation of banks. Thats why i keep coming back to it. Assets are recovered but deposits arent....

And even if deposits are insured theyre still lost. it just means the government is on the hook for the losses.

Do you think someone worth 10M keeps his money in bank accounts? Seriously?