It's Not a Credit Crunch, It's a Deflation

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SamLinder's picture
SamLinder
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It's Not a Credit Crunch, It's a Deflation

http://seekingalpha.com/article/123287-it-s-not-a-credit-crunch-it-s-a-d...

If you’re within one astronomical
unit of a TV, by now you’re convinced that we’re in a Credit Crunch. 
If only those nasty financial institutions would just loosen credit
things could get right, right?  Not at all; this is a deflation.

<More>

gyrogearloose's picture
gyrogearloose
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Re: It's Not a Credit Crunch, It's a Deflation

Starts off well enough, he recognises there has been a problem with too much credit

"We are experiencing a massive deflation to adjust for

1) the latest
& greatest credit bubble’s implosion and

2) a GDP no longer
artificially subsidized with financing shenanigans.

We aren’t as
wealthy as we thought, and our standard of living has been adjusted
down as a result of this reality check."

 

 

but then ????

""There is only one cure for a deflation and that is massive deficit spending ""

 

Yipppeee, we can borrow our way out of debt !!!!

 

 

 

pleaseremoveme's picture
pleaseremoveme
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Re: It's Not a Credit Crunch, It's a Deflation

The point is to replace bad debt by good debt and expensive debt by cheap debt. And it should be a temporary measure only.

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Davos
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Re: It's Not a Credit Crunch, It's a Deflation

Isn't it really a solvency crisis? Which would have symptoms of credit crisis, deflation, and about everything else we are witnessing now.

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pleaseremoveme
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Re: It's Not a Credit Crunch, It's a Deflation

What is a solvency crisis? Seriously: I can't find it in wikipedia! 

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Davos
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Re: It's Not a Credit Crunch, It's a Deflation

Hello Woupiestek:

http://www.netcastdaily.com/broadcast/fsn2009-0221-3a.asx

Take care

PS Also, you might want to look at GDP, back out imputations, then look at our debt, on and off balance sheet liabilities/obligations. You can do the same with the big banks, assets to liabilities and off balance sheet Derivatives.

I think you will find that Enron had a better debt to equity ratio before their doors slammed shut. 

This is the end of the debt super cycyle IMHO.

 3

Take a peak at Citi, 36 TRILLION in derivatives! The tiniest of mark-to-market write downs and I don't even want to think about what will happen to the large banks.

 

kmarinas86's picture
kmarinas86
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Re: It's Not a Credit Crunch, It's a Deflation
woupiestek wrote:

What is a solvency crisis? Seriously: I can't find it in wikipedia!

 

http://en.wikipedia.org/wiki/Insolvency

http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932009

http://en.wikipedia.org/wiki/The_Keynesian_Resurgence_of_2008_/_2009 

 

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Davos
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Posts: 3620
Re: It's Not a Credit Crunch, It's a Deflation

This will be on tomorrow's DG but in it you can hear them speak of 3+ trillion dollar budget deficits.

FSNNews 3rd Hr :00 Dep. FDR/Oboma, 3:05 Economy, 9:00 3trn Deficit, 19:20Classic Mistakes, 23:00 Hoover/Bush, FDR/Oboma, 25:30 Unemployment,

I truly believe that the entire problem as to why nothing can be fixed is becuase we haven't identified it but on a handful of financial blogs and with a handful of experts like Rogers and alike. 

pleaseremoveme's picture
pleaseremoveme
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Posts: 115
Re: It's Not a Credit Crunch, It's a Deflation

My point was that cheap credit used for the self liquidating kind of loans could ease the pain a little bit. The spending plans of the governments, although based on faulty economic philosophies, may achieve some of that: I suppose (possibly wrongly) that interest rates on governments securities are always going to be relatively low, so if the government is doing the borrowing, the credit is cheap.

 

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