Debt Deflation Bear Market: First Bounce - Eric Janszen

[Chomsky]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

How is it any different having 30% of Americans as zombie consumers, doing nothing but paying down debt?

[Retired Commish]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Eric:

"Japan’s experience with managing debt deflation via fiscal stimulus has been similar to that of the U.S. in the 1930s; whenever government spending was cut, the economy slumped back into depression. The U.S. finally escaped debt deflation when WWII. There is no evidence to support the belief that fiscal stimulus can end a debt deflation, but that is the belief that governments are following worldwide."

Comment: WWII obviously raised employment levels. Millions were employed in the military and at home in the huge war materials production. At the same time, savings had to be climbing with bond sales and forced savings on the home front because of rationing. People had the necessaties without the luxuries.
I think many in Gov't today falsely believe Gov't spending on a huge level can duplicate Gov't in the war era. Employment by these expenditures can't ever reach the real levels that WWII created. The cost to hire millions at todays rates would expand debt levels enormously beyond where they are headed.
Lastly, much of the up-tick in spending your chart refers to was the consumer taking advantage of the liquidation pricing available after a terrible Christmas season. Many of those spent dollars simply stole from future sales. Retail outlets will continue to shrink in numbers so as to reflect the fact that consumption will fall back to a sustainable number around 60% of GDP or less, the longer this goes on.

[WDCRob]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

I read about five months ago(I do not have the link) that statistically if the S&P hit 500 and the median house value dropped another 20 percent(already has) that 30 percent of all Americans would be theoretically BK(liabilities exceed assets).

Which is exactly why Fred and other realists, who see that the system is already destroyed, are calling for debt to be forgiven.

[c1ue]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

I can't see that the graph indicates that it is axiomatic that we are in a bear market rally and the S&P collapses.
Sorry, I just don't "get' the significance of this graph. Maybe someone can help me here?

Outback,

Not to be flip...well...actually to BE flip...what the graph is saying is that "its different this time" :eek:

RetiredCommish's point is also worth considering:

The consumption sacrifices made by the US people in WW II were because there was a widespread belief that the US' course of action was necessary and just.

Even disregarding the rebuilding Europe/Japan economic benefit to the US after WW II - merely the faith in government and inspiration from victory itself was beneficial.

In contrast today we have a race to the bottom between politicians, bankers, and regulators.

Anyone out there feel that what is happening is necessary and just?

I don't.

[rjwjr]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

I read about five months ago(I do not have the link) that statistically if the S&P hit 500 and the median house value dropped another 20 percent(already has) that 30 percent of all Americans would be theoretically BK(liabilities exceed assets). I would venture to say that a large percentage of these Americans would not be classified as "worthy". The majority of these people are a Chapter 7 waiting to happen and will have no access to private capital. Personally, I would never ever rent to someone whose liabilities(other than student loans) exceed assets under today's economic conditions.

You want close to 30 percent of all Americans cut off from bank credit?

That... is Armageddon.

Armageddon?? Sounds more like forced discipline and responsibility to me. Something most iTulipers already do on their own and something we wish the rest of the population would heed. I don't think it would be bad if more than 30% of all Americans were cut-off from bank credit. We need to re-set our mentalities as much as re-setting the system.

[The Outback Oracle]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Anyone out there feel that what is happening is necessary and just?

I don't.

It doesn't matter whether it is necessary. It was just inevitable.

[GeraldRiggs]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Steve:
I am sorry but I disagree with you about one thing. Yes, fiat money and central banking is a failure. However, don't think for a minute that it's going anywhere. Have you read "The Creature from Jekyll Island"? If not, you need to. CB's will not go quietly into the sunset and let governments take over coining their own money. Remember, the banksters run the government. They have for a very long time. It's sad, but true.

[cjppjc]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Anyone out there feel that what is happening is necessary and just?

I don't.

It doesn't matter whether it is necessary. It was just inevitable.

In search of the miraculous by P.D. Ouspensky.


Everything is dependent on everything else,
everything is connected, nothing is separate.
Therefore everything is going in the only way it can go.
If people were different everything would be different.
They are what they are, so everything is as it is.



The crowd neither wants nor seeks knowledge, and the leaders of the crowd, in their own interests, try to strengthen its fear and dislike of everything new and unknown. The slavery in which mankind lives is based upon this fear.
One thing alone is certain, that man's slavery grows and increases.
Man is becoming a willing slave. He no longer needs chains.
He begins to grow fond of his slavery, to be proud of it.
And this is the most terrible thing that can happen to a man.

[Chris Coles]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

The stock market rally is a disconnect between investor expectations and the economy. How disconnected?

I am having trouble with this graph. The PCE/S&P is rising vertically and looks to be above average but not extremely so. The rise in the ratio is largely due to S&P falling. While PCE has declined it is yet of minor importance in this ratio. There is a somewhat similar 'disconnect' in 2001-2 although not of quite the same magnitude. Presumably, in response to the latest rally the ratio has turned down a bit. Just looking at past patterns on the graph it looks entirely possible that the ratio turns down a bit and stabilises (relatively speaking). That means PCE stabilises and the S&P stabilises (more or less). Maybe PCE can stabilise with all the low interest rates? Maybe the ratio then turns back down as the share market rises and steadily continues that way for years?
I can't see that the graph indicates that it is axiomatic that we are in a bear market rally and the S&P collapses.
Sorry, I just don't "get' the significance of this graph. Maybe someone can help me here?

The secret is the graph, up to the turn of the century shows that the two sets of data track each other out of sequence by about a year. If you moved them , they would correlate but now, in this new phase, they are not out of sequence by a year but strongly running away from each other. One going through the roof the other through the floor, but in step, with the correlation no longer out of step by a year.

[The Outback Oracle]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

In search of the miraculous by P.D. Ouspensky.


Everything is dependent on everything else,
everything is connected, nothing is separate.
Therefore everything is going in the only way it can go.
If people were different everything would be different.
They are what they are, so everything is as it is.




The crowd neither wants nor seeks knowledge, and the leaders of the crowd, in their own interests, try to strengthen its fear and dislike of everything new and unknown. The slavery in which mankind lives is based upon this fear.
One thing alone is certain, that man's slavery grows and increases.
Man is becoming a willing slave. He no longer needs chains.
He begins to grow fond of his slavery, to be proud of it.
And this is the most terrible thing that can happen to a man.

Years ago I was watching an interview with James Herriott the author of the book "All Creatures Great and Small" on which the TV series was based. From memory the story was set in the late 1930's. For those in the USA who never saw it, the story was about a small contry town Veterinary Practice in rural England, and the various divergent characters who lived in the surrounding area. There were many entertaining and interesting characters.
Herriott was asked if his characters were real. He said they were, but that a character in the series might be made up from several actual life characters. When asked if he thought that these divergent 'characters' still existed he opined that they had largely disappeared under the influence of Television. He said that we tended to mimic the behaviour of role models on TV and this tended to make us all the same. I thought it was as astute observation and applied across a whole range of thinking and behaviour.

[ThePythonicCow]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

... When asked if he thought that these divergent 'characters' still existed he opined that they had largely disappeared under the influence of Television. He said that we tended to mimic the behaviour of role models on TV and this tended to make us all the same.

That's some kinda scary.

I grew up as a kid in the New England community immortalized in Norman Rockwell's paintings. I can personally recognize some of the characters in them. Most of them had a heck of a lot of fun being whatever odd and unusual being they turned out to be.

Most people seem a whole lot more bland nowadays. TV has been an enormous drug on humanity.

[cjppjc]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Years ago I was watching an interview with James Herriott the author of the book "All Creatures Great and Small" on which the TV series was based. From memory the story was set in the late 1930's. For those in the USA who never saw it, the story was about a small contry town Veterinary Practice in rural England, and the various divergent characters who lived in the surrounding area. There were many entertaining and interesting characters.
Herriott was asked if his characters were real. He said they were, but that a character in the series might be made up from several actual life characters. When asked if he thought that these divergent 'characters' still existed he opined that they had largely disappeared under the influence of Television. He said that we tended to mimic the behaviour of role models on TV and this tended to make us all the same. I thought it was as astute observation and applied across a whole range of thinking and behaviour.

That's very interesting. I had never thought about that.

[Mango]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Eric:

"Japan’s experience with managing debt deflation via fiscal stimulus has been similar to that of the U.S. in the 1930s; whenever government spending was cut, the economy slumped back into depression. The U.S. finally escaped debt deflation when WWII. There is no evidence to support the belief that fiscal stimulus can end a debt deflation, but that is the belief that governments are following worldwide."

Like Labasta said in an earlier comment, (for which he's still waiting for an answer) the statement above looks like a contradiction to me. Wasn't WWII just the Mother of All Stimulus Packages--albeit with fantastic motivation?

[The Outback Oracle]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Re WWII and fiscal stimulus there seems to me to be a very large and important difference. The stimulus was applied to the production of goods that could not be produced offshore. Then any excess money supply was being mopped up in War Bonds etc
The same sort of stimulus, if applied now, even if applied to large Infrastructure projects, would result in a substantial leakage into your External account resulting in more massive indebtedness to China, Mid East et al.
If you tried to limit this 'leakage' you would have to apply high interest rates which, conceivably, would result in nullifying the effect of the stimulus by contracting other sectors of your economy.
Then again, what the hell! Noone seems to worry about it anyway...except the Chinese are starting to sound downright agitated.

[Sharky]

Re: Debt Deflation Bear Market: First Bounce - Eric Janszen

Wasn't WWII just the Mother of All Stimulus Packages--albeit with fantastic motivation?

WW II stimulated production in the US: lots of factories and millions of new workers (women).

The stimulus packages of today, on the other hand, are intended to stimulate spending. They are more like the opposite of WW II in terms of their impact on the economy.

Even a war today wouldn't help as WW II did, as I explained in another thread:

http://www.itulip.com/forums/showthread.php?p=84723