Economists Support Occupy Wall Street

[blueblood]

Problem is that when you do that, you get thousands of bankings failing at the same time. Banks will not allow this to happen... they very last thing on earth they want is people paying back loans. If people even try do this the banks will ease credit because if they dont the money supply will contract quickly.

It's far better to ease credits with cash in the bank than go through open market operations. It's a sounder way of loaning out money. And if the money supply contracts, that means lower prices. Banks won't fail when people pay back loans, when that happens they just loan out more.

Your previous post skirts around my issue and our main difference. Your not hating the players, your hating the game. I'm hating the players, not the game.

[GostHacked]

It's far better to ease credits with cash in the bank than go through open market operations. It's a sounder way of loaning out money. And if the money supply contracts, that means lower prices. Banks won't fail when people pay back loans, when that happens they just loan out more.

Your previous post skirts around my issue and our main difference. Your not hating the players, your hating the game. I'm hating the players, not the game.

The game is rigged though, by the players that are telling you everything is fine.

[dre]

It's far better to ease credits with cash in the bank than go through open market operations. It's a sounder way of loaning out money. And if the money supply contracts, that means lower prices. Banks won't fail when people pay back loans, when that happens they just loan out more.

Your previous post skirts around my issue and our main difference. Your not hating the players, your hating the game. I'm hating the players, not the game.

You claim you dont like what the players are doing, but you the WHOLE FREAKIN POINT of the system you support is to allow the players to do exactly what they are doing.

Banks won't fail when people pay back loans, when that happens they just loan out more.

The problem is finding new borrowers in an environment where everyone is increasing savings and paying back their loans is impossible.

This environment leads to...

1. Debt liquidation and distress selling

2. Contraction of the money supply as bank loans are paid off

3. A fall in the level of asset prices

4. A still greater fall in the net worths of business, precipitating bankruptcies

5. A fall in profits

6. A reduction in output, in trade and in employment.

7. Pessimism and loss of confidence

8. Hoarding of money

9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.

And yes... banks WILL fail in huge numbers. Thousands of banks would have failed in 2008 if the trillions of dollars were not defecit spent into the economy. Most, or all of them.

By supporting the fiat system, youre supporting a literally endless supply of easy credit. That easy credit drives the business cycle. It creates asset bubbles, and then we race to dump money into the system so that the it doesnt collapse due to lack of liquidity.

Your "answer" to deal with out of control debt and spending is to give government a credit card with no limits, and unlimited deffered payments

[blueblood]

You claim you dont like what the players are doing, but you the WHOLE FREAKIN POINT of the system you support is to allow the players to do exactly what they are doing.

The problem is finding new borrowers in an environment where everyone is increasing savings and paying back their loans is impossible.

This environment leads to...

1. Debt liquidation and distress selling

2. Contraction of the money supply as bank loans are paid off

3. A fall in the level of asset prices

4. A still greater fall in the net worths of business, precipitating bankruptcies

5. A fall in profits

6. A reduction in output, in trade and in employment.

7. Pessimism and loss of confidence

8. Hoarding of money

9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.

And yes... banks WILL fail in huge numbers. Thousands of banks would have failed in 2008 if the trillions of dollars were not defecit spent into the economy. Most, or all of them.

By supporting the fiat system, youre supporting a literally endless supply of easy credit. That easy credit drives the business cycle. It creates asset bubbles, and then we race to dump money into the system so that the it doesnt collapse due to lack of liquidity.

Your "answer" to deal with out of control debt and spending is to give government a credit card with no limits, and unlimited deffered payments

No, my answer is ranch up interest rates which will intice people to square off their debts. When the bank gets full of cash, they lend again as there will always be borrowers as banks flush with reserves will be eager to loan out once again.

As timg says, this system is like a sharp kitchen knife. Who do we want handling the knife, a 5 yr. Old or his mom?

[dre]

No, my answer is ranch up interest rates which will intice people to square off their debts. When the bank gets full of cash, they lend again as there will always be borrowers as banks flush with reserves will be eager to loan out once again.

As timg says, this system is like a sharp kitchen knife. Who do we want handling the knife, a 5 yr. Old or his mom?

No, my answer is ranch up interest rates which will intice people to square off their debts. When the bank gets full of cash, they lend again as there will always be borrowers as banks flush with reserves will be eager to loan out once again.

Problem is thats all fantasy. Banks dont WANT to be flush with reserves. If reserves start to accumulate they will CUT THE RATES. Thats why interest rates have remained low even as defecits mount.

You can shout "raise the rates" from the rooftops until youre blue in the face, but under our current system (the one you support) that simply will not happen. Interest rates are NOT the constraint on defecit spending that traditional economic theory predicted. The exact opposite is true... Defecit spending drives rates DOWN... not UP.

As timg says, this system is like a sharp kitchen knife. Who do we want handling the knife, a 5 yr. Old or his mom?

Yeah well common sense says that if everyone who touches the knife over a 40 year period stabs you with it, you should take it away.

The reality is if you dont want credit bubbles that spawn asset bubbles, that burst and require systemic bailouts of the financial system, then its odd that you are such a big supporter of the system that gives them these tools.

Edited December 1, 2011 by dre