The "Big Economic Lie" and why rates matter...

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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 5:41 am

Indaswamp wrote:Your ideas of what constitute : money, debt, wealth, and their relation to each other are the main reason for our communication difficulties.
I agree complete. There are very many types of all of them and not mixing them up and swapping them and making apples to cesspool sludge comparisons requires being very careful with the language. And then interpreting the meaning beyond that is orders of magnitude more complicated. Your links are sloppy with the language, their graphs, etc. This is a problem in such a highly technical area. Not difficult if you want to make assertions. Difficult if you are seeking the truth by seriously trying to prove yourself wrong, because you are always wrong when it is so complicated. The question is where and why.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 5:46 am

SpinnerMan wrote:
Indaswamp wrote:Your ideas of what constitute : money, debt, wealth, and their relation to each other are the main reason for our communication difficulties.
I agree complete. There are very many types of all of them and not mixing them up and swapping them and making apples to cesspool sludge comparisons requires being very careful with the language. And then interpreting the meaning beyond that is orders of magnitude more complicated. Your links are sloppy with the language, their graphs, etc. This is a problem in such a highly technical area. Not difficult if you want to make assertions. Difficult if you are seeking the truth by seriously trying to prove yourself wrong, because you are always wrong when it is so complicated. The question is where and why.

I don't have a problem comprehending what is being conveyed at most of the links. I sometimes will read one and have numerous questions and confusions, but after learning more about the subject matter I find that when I go back and reread it, I understand it.
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Re: The "Big Economic Lie" and why rates matter...

Postby beretta24 » Wed Oct 09, 2013 8:03 am

One big difference today spinner is we have pulled so much demand forward, and increased our costs to produce (in relation to other countries) that there aren't enough people that want to buy our expensive schit anymore.
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Re: The "Big Economic Lie" and why rates matter...

Postby ScaupHunter » Wed Oct 09, 2013 8:15 am

As one of if not the most important consumer nations in the world we can fix that problem quite simply. It is called a tarriff. The issue is people are perfectly happy to pay low prices for cheap crap made in China. The stuff breaks constantly and is disposable which creates more issues. It really comes down to a major change in attitude in America. We have become accepting of lousy product, lousy service, and want it all cheap.
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Re: The

Postby SpinnerMan » Wed Oct 09, 2013 8:52 am

beretta24 wrote:One big difference today spinner is we have pulled so much demand forward, and increased our costs to produce (in relation to other countries) that there aren't enough people that want to buy our expensive schit anymore.

No question that we are driving costs up in many areas to our detriment.

When you borrow money, regardless of who it is from. The borrower is pulling their demand forward. However, the person that you borrow it from is pushing their demand into the future. You can only spend or loan that dollar (or hide it under the mattress), but you cannot do both. There are two people (or entities) involved in a debt transaction. You have to consider the impact on behavior of both to figure out the net effect.

This is why government borrowing fails to stimulate the economy. The porkulus bill in large part flopped precisely because of this reason. The government has to take from someone, somehow, every penny it spends, so whomever they take from in whatever form must reduce their spending by the exact same amount.

The arguments appear circular and largely correlation = causation types.

The one is that debt created the income, but maybe the income created the debt :huh:

People spend much greater times in college. Therefore of course they are going to accumulate more debt on average even if it wasn't at bubble proportions. There are a lot of societal changes like that which need to be considered and their impact understood and quantified.

Then there is the obsession over the fractional reserve banking and the theoretical limit going to infinity as that value approaches zero. No discussion of the practical limits, just a formula that breaks down when the constraint on borrowing is not the reserve requirements. There are only so many loans that are perceived as being profitable and no one is going to make more than that even if legally permitted to do so.

This stuff is very important, but very difficult to understand. That's why it is so important to be skeptical, which means to be critical.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 10:07 am

debt has grown at roughly 7% while GDP has grown on avg. 3% over the last 30-40 years...i.e. total debt (that's everything-gov. personal, corporate...) has doubled every 10 years. That is what has sustained our growth. Debt expansion. We hit a wall in 2007 and have not regained the same debt expansion growth rate. That is why our economy is stumbling. We are in a massive deleveraging cycle. If you believe that we will resume that 3% avg. GDP growth rate, then you have to explain where the next doubling of debt will come from...i.e. another 56 TRILLION dollars of debt. Ain't gonna happen folks. Not unless you believe in skittle crapping unicorns....
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 10:33 am

Indaswamp wrote:That is what has sustained our growth.
Or our growth has sustained that debt :wink:

Indaswamp wrote:We hit a wall in 2007
We burst an economic bubble in 2007. Not the first, not the last, not even unusual. Did the debt fuel the bubble or did the bubble fuel the debt? They clearly feed off of each other.

Indaswamp wrote:have not regained the same debt expansion growth rate. That is why our economy is stumbling.

Or because our economy is stumbling we have not regained debt expansion. But we were in a bubble so, returning to bubble conditions would be just as destructive, so this would not be a reasonable objective.

Why is our economy stumbling since the bubble burst?

In 2006, the Dems took over Congress and in 2007 they massively expanded government spending. Does massive expansion of government cause the economy to soar or stumble? :huh:

Then in 2008, the nation took a flier on an affirmative action President and we had a massive porkulus bill. Did that massive spending cause the economy to soar or stumble? :huh:

Then there was Obamacare will that cause the economy to soar or stumble? :huh:

Obama still wants to hammer CO2 emissions and does that threat cause the economy to soar or stumble? :huh:

Obama and his minions in charge of the bureaucracy and does that help the economy soar or cause it to stumble? :huh:

Obama pushed through a minimum wage increase and does that cause the economic fortunes of the young and unskilled to soar or stumble? :huh:

Obama and his minions supported insane unemployment compensation and does that cause the economy to soar or stumble? :huh:

Massive increase in food stamps, those on disability, and other welfare will cause the economy to soar or stumble? :huh:

Since 2007, there has been so many foolish things done by the government that guaranteed to cause economic hardship. If not for all of this foolishness, the economy would be doing just fine. Unless you believe all of those things are of negligible to positive economic impact.

I truly believe that most of what you refer to is the symptom and not the cause. The horrible economic policies of the Democrats in Congress and Obama and his administration have put a huge drag on the economy, yet it still limps along. If that burden would have never been imposed, a normal economic recovery from the explosion of the housing bubble would have occurred by now. He and his minions really have done that much harm.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 11:19 am

SpinnerMan wrote:
Indaswamp wrote:That is what has sustained our growth.
Or our growth has sustained that debt :wink:
You have it backwards my friend.

Indaswamp wrote:We hit a wall in 2007
We burst an economic bubble in 2007. Not the first, not the last, not even unusual.

NOT EVEN UNUSUAL??!?! :lol3: :rolleyes: WOW! So this is just like all recessions in the past? :no:



Did the debt fuel the bubble or did the bubble fuel the debt? They clearly feed off of each other.

Indaswamp wrote:have not regained the same debt expansion growth rate. That is why our economy is stumbling.

Or because our economy is stumbling we have not regained debt expansion. But we were in a bubble so, returning to bubble conditions would be just as destructive, so this would not be a reasonable objective.

Why is our economy stumbling since the bubble burst?

In 2006, the Dems took over Congress and in 2007 they massively expanded government spending. Does massive expansion of government cause the economy to soar or stumble? :huh:

Then in 2008, the nation took a flier on an affirmative action President and we had a massive porkulus bill. Did that massive spending cause the economy to soar or stumble? :huh:

Then there was Obamacare will that cause the economy to soar or stumble? :huh:

Obama still wants to hammer CO2 emissions and does that threat cause the economy to soar or stumble? :huh:

Obama and his minions in charge of the bureaucracy and does that help the economy soar or cause it to stumble? :huh:

Obama pushed through a minimum wage increase and does that cause the economic fortunes of the young and unskilled to soar or stumble? :huh:

Obama and his minions supported insane unemployment compensation and does that cause the economy to soar or stumble? :huh:

Massive increase in food stamps, those on disability, and other welfare will cause the economy to soar or stumble? :huh:

Since 2007, there has been so many foolish things done by the government that guaranteed to cause economic hardship. If not for all of this foolishness, the economy would be doing just fine. Unless you believe all of those things are of negligible to positive economic impact.

I truly believe that most of what you refer to is the symptom and not the cause. The horrible economic policies of the Democrats in Congress and Obama and his administration have put a huge drag on the economy, yet it still limps along. If that burden would have never been imposed, a normal economic recovery from the explosion of the housing bubble would have occurred by now. He and his minions really have done that much harm.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 11:37 am

Here is a fun fact for you-No recession in U.S. History has ever recovered without employment leading the way. This recovery is one massive mirage of easy money.
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 11:40 am

Indaswamp wrote:
SpinnerMan wrote:
Indaswamp wrote:That is what has sustained our growth.
Or our growth has sustained that debt :wink:
You have it backwards my friend.

So what is the optimum level? If we have too much, when did we cross that line?

Indaswamp wrote:
SpinnerMan wrote:We burst an economic bubble in 2007. Not the first, not the last, not even unusual.

NOT EVEN UNUSUAL??!?! :lol3: :rolleyes: WOW! So this is just like all recessions in the past? :no:

The bubble was like past bubbles.

http://www.housingzone.com/industry-data-research/history-real-estate-bubbles-1800
"For the first 144 years of real estate enclosure in the U.S., land sales and/or real estate construction peaked almost consistently, every 18 years," Anderson writes. "The world’s worst downturns are always preceded by land speculation (the chasing of the economic rent) fueled by misguided credit creation courtesy of the banks."


Image

The Great Recession was like the Great Depression. It was the fools in Washington thinking they can fix the economy by expansion of bureaucratic control over it. If not for the natural gas boom, it would have been the second Great Depression.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 11:41 am

SMH, You my friend are blind.
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 11:47 am

Indaswamp wrote:SMH, You my friend are blind.

So what is the optimum level of debt? It's much like the global warming debate. If you can't give a ballpark answer to that question, how certain can you be that you are not the blind one? :huh:
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 11:50 am

SpinnerMan wrote:
Indaswamp wrote:SMH, You my friend are blind.

So what is the optimum level of debt? It's much like the global warming debate. If you can't give a ballpark answer to that question, how certain can you be that you are not the blind one? :huh:

Depends on if you are asking a keynesian or not.... :wink:

Truth is, any debt growth rate sustained greater than GDP becomes problematic.
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Re: The "Big Economic Lie" and why rates matter...

Postby ScaupHunter » Wed Oct 09, 2013 11:56 am

It is simple math Spinner.

Anytime the annual debt exceeds the annual income you have a problem.

Optimal would be having the natinoal debt being reduced while the national GDP increases.

Reality of optimal condition would be 2% increase in government debt with 3% increase in GDP for the nation. That would keep the economy balanced and allow the government to justify it's existence without challenge. It would also allow for repayment of existing debt.
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 12:22 pm

Indaswamp wrote:
SpinnerMan wrote:
Indaswamp wrote:SMH, You my friend are blind.

So what is the optimum level of debt? It's much like the global warming debate. If you can't give a ballpark answer to that question, how certain can you be that you are not the blind one? :huh:

Depends on if you are asking a keynesian or not.... :wink:

Truth is, any debt growth rate sustained greater than GDP becomes problematic.

Truth is, any debt growth rate sustained less than GDP becomes problematic.

It is an equally true statement. Zero debt of all kinds would be problematic. Granted not as much as infinite debt.

ScaupHunter wrote:Anytime the annual debt exceeds the annual income you have a problem.
Not at all. The vast majority of people that have bought a house, had a debt at the moment they signed the mortgage paper that exceeded their annual income often by a large amount. If that is their only debt, it is rarely a problem.

Making blanket statements like these are easily refuted. The reason is that it is far more complicated.

What is the debt service rate? Let's pick an easy number like 5%. If the combined debt for all debts including the government debts that you will ultimately be responsible for is 100% of your income. That costs you 5% per year if you don't pay them down at all. Even at 500%, you are only talking about 25% of your income. And then who holds that debt. You may well be paying yourself if you have hold some of that debt.

If you believe the numbers in the link, we are at around 350% of our annual income meaning that somewhere in the neighborhood of 20% of our income is going to pay the debt. Given that somewhere around half of that useless government debt and another large chunk is useless consumer debt, there is no doubt this is causing economic harm. How much? Image

The same amount of debt used to finance the construction of productive assets would be far less burdensome than all this debt that financed waste.

We have big problems. I am not disputing that. But being accurate as to how much and why is complicated and therefore requires a lot of skepticism.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 2:20 pm

r
SpinnerMan wrote:
Indaswamp wrote:
SpinnerMan wrote:
Indaswamp wrote:SMH, You my friend are blind.

So what is the optimum level of debt? It's much like the global warming debate. If you can't give a ballpark answer to that question, how certain can you be that you are not the blind one? :huh:

Depends on if you are asking a keynesian or not.... :wink:

Truth is, any debt growth rate sustained greater than GDP becomes problematic.

Truth is, any debt growth rate sustained less than GDP becomes problematic.

It is an equally true statement. Zero debt of all kinds would be problematic. Granted not as much as infinite debt.

ScaupHunter wrote:Anytime the annual debt exceeds the annual income you have a problem.
Not at all. The vast majority of people that have bought a house, had a debt at the moment they signed the mortgage paper that exceeded their annual income often by a large amount. If that is their only debt, it is rarely a problem.

Making blanket statements like these are easily refuted. The reason is that it is far more complicated.

What is the debt service rate? Let's pick an easy number like 5%. If the combined debt for all debts including the government debts that you will ultimately be responsible for is 100% of your income. That costs you 5% per year if you don't pay them down at all. Even at 500%, you are only talking about 25% of your income. And then who holds that debt. You may well be paying yourself if you have hold some of that debt.

If you believe the numbers in the link, we are at around 350% of our annual income meaning that somewhere in the neighborhood of 20% of our income is going to pay the debt. Given that somewhere around half of that useless government debt and another large chunk is useless consumer debt, there is no doubt this is causing economic harm. How much? Image

The same amount of debt used to finance the construction of productive assets would be far less burdensome than all this debt that financed waste.

We have big problems. I am not disputing that. But being accurate as to how much and why is complicated and therefore requires a lot of skepticism.

You can not compare how a household operates vs. how the gov. does relative to debt. And your skepticism has more to do with ignorance.
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 2:29 pm

Indaswamp wrote:And you skepticism has more to do with ignorance.
And your lack of it :beer:
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 2:31 pm

SpinnerMan wrote:
Indaswamp wrote:And you skepticism has more to do with ignorance.
And your lack of it :beer:

Our monetary system is debt. There must be debts in existence before economic progress can happen. This is not a chicken or the egg question. I.E. when debt expansion stops, so does economic progress!
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Re: The "Big Economic Lie" and why rates matter...

Postby aunt betty » Wed Oct 09, 2013 2:58 pm

My personal economy would be awsome if I could simply go further and further into debt.
Why can't spinnerman admit that there is a finite limit and eventually the buck stops here?
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 3:11 pm

Indaswamp wrote:
SpinnerMan wrote:
Indaswamp wrote:And you skepticism has more to do with ignorance.
And your lack of it :beer:

Our monetary system is debt. There must be debts in existence before economic progress can happen. This is not a chicken or the egg question. I.E. when debt expansion stops, so does economic progress!

Except after WWII, when debt contracted and the economy expanded.

Yeah, yeah, I know that was different, but your absolute statement remains absolutely true.

Our economic output is dependent on our monetary system. That is true.

A good monetary policy makes the economy more efficient and therefore more productive and therefore leads to greater economic output.

A bad monetary policy gums up the works.

The optimum level of debts will lead to the optimum economic progress. When debts are excessive, contraction in the debts will improve the economic outlook and when they are inadequate, expanding them improves the outlook. It's not chicken or egg. It's the three bears.

Image

Do you realizing that you are arguing that we have too much debt but claiming we need more to make things better?

When you have too much, less is more :thumbsup:

However, our biggest problem is all the stupid things we did since the Dems took over in 2007 and Bush crashed and burned and Obama replaced him. Collectively this has probably killed economic output by over $2T over that time period or over $7,000 for every man, woman, and child. The economic output could easily be up by more than $1T/yr ($10k/yr for the average family of 4) relative to where it is if the federal government had taken a pro-growth approach as opposed to a pro-government approach.

That is unless you truly believe Obama's policies were not harmful to the economy and it didn't matter what he did because debt expansion wasn't going to happen and therefore the economy was never going to grow any more than the anemic rate that it has and Obamacare, porkulus, et. al. have had negligible economic impact relative to what the adoption of pro-growth policies would have had.

Call me ignorant, but I believe Obama's policies have harmed the economy and we would have been much better off with pro-growth as opposed to pro-government policies. Maybe you are correct and even if Obama had adopted pro-growth policies it wouldn't have made a significant difference.

Either Obama's policies harmed the economy or they did not. Did they in your opinion and how much?
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Re: The "Big Economic Lie" and why rates matter...

Postby beretta24 » Wed Oct 09, 2013 3:19 pm

aunt betty wrote:My personal economy would be awsome if I could simply go further and further into debt.
Why can't spinnerman admit that there is a finite limit and eventually the buck stops here?

He never said there wasn't. He just questions whether we've reached it or are near it. To me, the decreased rate of return on debt is evidence we're near the limit. The million dollar question is what is the magnitude of the pending correction.
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Re: The "Big Economic Lie" and why rates matter...

Postby Indaswamp » Wed Oct 09, 2013 3:20 pm

SpinnerMan wrote:
Indaswamp wrote:
SpinnerMan wrote:
Indaswamp wrote:And you skepticism has more to do with ignorance.
And your lack of it :beer:

Our monetary system is debt. There must be debts in existence before economic progress can happen. This is not a chicken or the egg question. I.E. when debt expansion stops, so does economic progress!

Except after WWII, when debt contracted and the economy expanded.

Yeah, yeah, I know that was different, but your absolute statement remains absolutely true.

Our economic output is dependent on our monetary system. That is true.

A good monetary policy makes the economy more efficient and therefore more productive and therefore leads to greater economic output.

A bad monetary policy gums up the works.

The optimum level of debts will lead to the optimum economic progress. When debts are excessive, contraction in the debts will improve the economic outlook and when they are inadequate, expanding them improves the outlook. It's not chicken or egg. It's the three bears.

Image

Do you realizing that you are arguing that we have too much debt but claiming we need more to make things better?

When you have too much, less is more :thumbsup:

However, our biggest problem is all the stupid things we did since the Dems took over in 2007 and Bush crashed and burned and Obama replaced him. Collectively this has probably killed economic output by over $2T over that time period or over $7,000 for every man, woman, and child. The economic output could easily be up by more than $1T/yr ($10k/yr for the average family of 4) relative to where it is if the federal government had taken a pro-growth approach as opposed to a pro-government approach.

That is unless you truly believe Obama's policies were not harmful to the economy and it didn't matter what he did because debt expansion wasn't going to happen and therefore the economy was never going to grow any more than the anemic rate that it has and Obamacare, porkulus, et. al. have had negligible economic impact relative to what the adoption of pro-growth policies would have had.

Call me ignorant, but I believe Obama's policies have harmed the economy and we would have been much better off with pro-growth as opposed to pro-government policies. Maybe you are correct and even if Obama had adopted pro-growth policies it wouldn't have made a significant difference.

Either Obama's policies harmed the economy or they did not. Did they in your opinion and how much?


I'm stating monetary fact as it is in today's monetary system. stop making it a left/right paradigm argument-it is bigger than that and neither party will address the real issues.
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Re: The "Big Economic Lie" and why rates matter...

Postby SpinnerMan » Wed Oct 09, 2013 3:32 pm

Indaswamp wrote:I'm stating monetary fact as it is in today's monetary system. stop making it a left/right paradigm argument-it is bigger than that and neither party will address the real issues.
It is not a left/right paradigm argument. It is a question of the impact of the policies that have been enacted since 2007. Was it significant in your mind or were those policies collectively fairly benign in terms of their impact on the economy?

See that is the catch-22 that you are arguing. Obamacare, porkulus, the massive growth in spending, regulation, etc. etc. either harmed the economy and therefore we would have seen decent growth without them making your debt expansion argument far less significant or those policies caused no economic harm, so economically-wise they are not unsound policies.

Did those policies cause significant harm to the economy? It's a simple yes or no question. Either 3 or two letters is all you need to type. I don't think you buy the Obama argument that they had significant positive impact on the economy and things would be even worse with out them, but that would definitely help your debt expansion argument if true.
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Re: The

Postby aunt betty » Wed Oct 09, 2013 3:47 pm

beretta24 wrote:
aunt betty wrote:My personal economy would be awsome if I could simply go further and further into debt.
Why can't spinnerman admit that there is a finite limit and eventually the buck stops here?

He never said there wasn't. He just questions whether we've reached it or are near it. To me, the decreased rate of return on debt is evidence we're near the limit. The million dollar question is what is the magnitude of the pending correction.

Sounds like two oil men arguing over whether or not we passed "peak production" to me.
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Re: The "Big Economic Lie" and why rates matter...

Postby beretta24 » Wed Oct 09, 2013 5:35 pm

aunt betty wrote:
beretta24 wrote:
aunt betty wrote:My personal economy would be awsome if I could simply go further and further into debt.
Why can't spinnerman admit that there is a finite limit and eventually the buck stops here?

He never said there wasn't. He just questions whether we've reached it or are near it. To me, the decreased rate of return on debt is evidence we're near the limit. The million dollar question is what is the magnitude of the pending correction.

Sounds like two oil men arguing over whether or not we passed "peak production" to me.

Nah, I gotta side with swamp on this one. When we pull back on QE I don't see how we avoid a 20 percent plus correction in the market. Some would argue >50 percent. Regardless, our standard of living has likely passed its peak won't be at that level for 10 plus years at least.

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