Rattan give this a look (hell this would make a good thread but i think most people should read this article along with the quiet coup by simon
johnson) I HOPE (not that the market crashes ..jerk ....lol ) but that this does not fall on DEAF or willingly ignorant ears
www.itulip.com...
In a recession, a recovery in personal consumption, incomes, and retail sales signals the start of recovery. The virtuous cycle of credit
growth--and its corollary, debt growth—combine with rising incomes as the rate of unemployment growth slows. Credit expansion leads the economy out
of the cycle, followed by incomes. That is what many stock market participants think they are seeing now, as previous experience has trained them to
see. But they are wrong
Joes six pack; why
In an economy where household expenditure accounts for 71% of GDP as in the U.S. in 2008, if household cash flows from wage income declines,
retail spending falls. Government through interest rate cuts and tax cuts stimulates the economy by increasing credit cash flows. This approached
effectively to end every recession in the U.S. since the end of WWII. Keep in mind that each recession was created by monetary policy, by the
tightening of credit in order to reduce inflation expectations, real or imagined.
so considering this "decline" wasn't initiated by the gov't trying to reduce inflation expection's and purposefully choking off credit.....the
indicators people are trained to look for......(well lets see)
joe six pack ; hurry up and explain idol is coming on soon
Think of a consumer-dependent economy as a waterwheel, with household cash flow from wages and credit driving the wheel, and the wheel driving the
creation of new jobs, income, and credit, pumping money into the economy. If either the credit flows or the income flows dry up, the wheel slows. If
they both dry up, one after the other, the wheel slows a lot. In a recession, the government tries to get the wheel moving again by making up for
private credit flows and private income flows with government credit and government jobs.
J six pack; keep talking i'm barely paying attention
A depression, on the other hand, happens when debt levels are so high that there is not enough cash flow from incomes or new credit creation in
the economy to service the interest on the debt. The result is debt deflation and economic depression. Debt deflation started in 2006 for households
when the price of their homes began to fall.
J6p gee is that what we have?
A depression, unlike a recession, is not induced by government raising interest rates to combat inflation. On the contrary, a depression occurs in
spite of all efforts by government to expand credit; interest rates are cut to zero yet the debt deflation goes on
joe six pack: ehh that is not good right?
Debt deflation cannot be stopped by government credit expansion because that effort only increases debt levels that are already excessive as a
result of decades of previous interventions to re-start the already over-indebted economy. As the economy shrinks, there is even less income available
to repay debt, and a vicious cycle sets in. The wheel not only stops, it begins to run backwards and pumps money out of the economy.
Joe six pack: uh ohh
Debt deflation at first withdraws household purchasing power from credit. Later households experience a decline purchasing power from loss of wage
income as layoffs increase and savings are consumed in debt repayment. Government, by pouring vast sums of government money into the economy in an
attempt to restart the virtuous credit cycle can produce a small “bounce” in the decline in aggregate demand that shows up as consumer spending,
but cannot restart the wheel as it can during a recession. Debt levels continue to fall, and soon consumer expenditures as well.
Joe six pack; sound like gobblygook but still does not sound good
nice chart with the link showing these indicators ....do a small bounce
Stock market participants are trained by previous recessions since WWII to expect a recovery after consumption expenditures turn around in
response to fiscal and monetary stimulus. They are not wired to comprehend the wholly different dynamics of a debt deflation
Joe six pack ; snoring........ who will wake up turn on TV and here more perception management from MSM.....subtly nudging him back to " the economy
is fine" land before he has to deal w/ "doom and gloomer's " like me who are persistent
This rally does not reflect an improvement in the underlying economy but the response of market participants to short term government policy in
the context of a widespread misperception of the current depression as a recession
on a side note a nice spring cold front just came thru S.FL and i will be spending tuesday afternoon surfing .....everyone have a good nite and try to
stay open minded and positive in life...and maybe concentrate on growing the relationships you have in your life (wife /siblings/friends instead of
pinning your happiness on a stk mkt recovery....times will be tuff in the economic arena but i gotta tell you ....these times are great opportunity's
to try and step away from material things (if you can still pay your bills) and take a closer look at bettering yourself and or relationships......and
if you can't currently pay your bills....believe me i am not hoping for the economy to collapse i maybe hoping for globilization to collapse...along
w/ the associated offshoring of our jobs (and the rebuilding of american manufacturing)............look at the job sectors that are growing (like
care for the Elderly ..esp down here in S. FL).....and why not positon yourself to help other's and make a decent living by looking into
this.....wether or not it is your long term career ambition...it could make for a nice short term detour.....for others a move may not be so easy....i
would...ask for wisdom to help learn to put your self aggresively into a situation where you can find work i would ask myself to find a way to do this
everynite ....and then as you do....look for better work....where there is a will their is almost always away....finding a way to do what ever it
takes to be upbeat and hopeful ( and forgive yourself ) in this department should not be negotiable in life (because when the chips are down
....only those that say "hell no" i'm not going out like this....find a way... and ..survive..even excel.. . IMO.....good luck to everyone
......sorry for going off on tangent
[edit on 6-4-2009 by cpdaman]
[edit on 6-4-2009 by cpdaman]
[edit on 6-4-2009 by cpdaman]
