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Someone was going on this a.m. on the tv while I was making coffee. He sounded pretty reasonable, and ended with "Well, this could be fixed by injecting more cash, but it would take around $35 trillion."

Time for household budget tips?

To save on coffee, mix your favorite beans with an equal portion of ground roasted barley. If you can buy barley in bulk, it is a simple matter to roast it in the oven.

When you are using the oven anyway that is, and on cold days.

It doesn't taste all that bad, not really.



Experience keeps a dear school, but fools will learn in no other. -- Dr Johnson
by melvin (melvingladys at or near yahoo.com) on Fri Oct 24th, 2008 at 01:47:08 PM EST
The problem is that money is just a governmental IOU backed by taxes.  It isn't an asset as far as the government is concerned, it's a liability.  In a functioning system, people are willing to accept those IOUs because the government is good for them, but the amount of debt involved now is beyond the ability to issue money to cover (i.e. there is no way to raise enough taxes to back that much money).  Pumping more money into the market is just pumping more bad paper into the market.  It may devalue existing debt by devaluing the means of paying the debt (money), but it can't devalue the debt as much as the assets that supposedly backed the debt have devalued, so it won't fix anything, and lenders will continue to insist that more hard assets be put on the table to balance the bottom line.
by rifek on Fri Oct 24th, 2008 at 04:54:07 PM EST
[ Parent ]
As long as the debt is denominated in their own currency, there's nothing in principle to prevent them from printing enough money to cover it. They can, after all, issue the currency by fiat.

But there's the pesky little detail that it'll shoot their credit-worthiness to shreds.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Oct 24th, 2008 at 05:00:55 PM EST
[ Parent ]
... for them', because they have to pay tax liabilities.

That is, the backing is not the tax receipts collected, which determine how much of the money created by spending is then immediately destroyed versus how much is added to the supply of fiat currency ...

... but the tax liabilities that give households and businesses an urgent need to be able to make payments in fiat currency.

But as we see in countries where monetary systems melt down into hyperinflation, that is just the kernel of demand for fiat currency ... when a currency loses its ability to function as a store of value, and becomes a means of exchange and nothing more, it no longer functions as a full fledged money.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Oct 26th, 2008 at 03:54:10 PM EST
[ Parent ]
Right, a government can force the adoption of a currency by making it the only accepted means of payment for taxes.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Sun Oct 26th, 2008 at 04:56:33 PM EST
[ Parent ]
However, they cannot force people to hold balances in the currency if people are confident that the currency can always be obtained at better terms by holding an asset denominated in another money and cashing it in when needed ... which is the hyperinflation scenario.

In the face of hyperinflation, tax liabilities are always easier to meet if they are deferred, unless the tax liabilities are indexed, but then that turns into a disincentive to hold balances in the fiat currency, since the direct way to gain the returns in the currency to meet the obligations are to hold a more stable money.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Oct 26th, 2008 at 05:33:30 PM EST
[ Parent ]
it would take around $35 trillion.
Thank you melvin!  Earlier I asked how many multiples of the current money supply it would take to pay off all of the bad bets and debt.  It was not a rhetorical question.

Given how CDSs and the other derivatives are structured, is there any estimate of the total amount of debt that is being guaranteed by these instruments?  Put another way, the way things are currently structured, how many different parties will have to pay for the same defaulted debt, (the entire debt, not portions of it,) and why can we not devise a way to only pay once?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 24th, 2008 at 10:49:55 PM EST
[ Parent ]
ARGeezer:
it would take around $35 trillion.
Thank you melvin!  

well, i heard there are 32 trillion parked offshore in tax hideaways, that should cover it nicely..i'm sure we could rustle up the other 3 t. somehow, maybe taxing forex, funnelling it all through one UN-mandated portal, and skimming a cent on every dollar to be slated for micro lending and aid. the 'players' wouldn't miss it, and we'd solve the credit crunch pronto.

oh, and legalise and tax hemp too. it's a lot cheaper to get the peeps happy than to keep them tased into submission, and the authoritarians'll be able to use the cloth for all those nice uniforms they're so kinky for...

win-win, now shurrup and watch the telly like a good consumer!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Oct 25th, 2008 at 08:30:56 PM EST
[ Parent ]
There isn't $32 trillion parked anywhere, not even King Fahd's mattress.  No, cash can not fix this problem.  Only hard assets can.
by rifek on Sat Oct 25th, 2008 at 09:06:18 PM EST
[ Parent ]
... A owes B, which is a credit for B which was collateral for borrowing from C, so B owes C, which is a credit for C which was collateral for borrowing from D, and so on ... the total exposure can easily be many multiples of annual income, while at the same time the net payments to service the debt is only a fraction of annual income.

Of course, late in the Clinton administration, the Democratic administration and Republican Congress set up a system where a wide range of activities were immune from regulation. And competition among for-profit financial firms will always push them to scrimp on prudential reserves "under competitive pressure" if other firms are doing the same, which is why Panics, like the Panic of 2008, are regular events in non-regulated financial systems ... cf. the Panic of 1792, 1797, 1819, 1825, 1837, 1847, 1857, 1866, and etcera.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Oct 26th, 2008 at 04:04:08 PM EST
[ Parent ]
Panics, like the Panic of 2008, are regular events in non-regulated financial systems

A fact which is conveniently forgotten too soon after the previous panic...

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Sun Oct 26th, 2008 at 05:06:53 PM EST
[ Parent ]
... followed as it was by an industrial "Depression" of nearly a decade, imprinted the risk on that generation. However, by the 1960's, those who experienced the Great Depression as adults were giving way to those who had not, and the process of ripping out the regulations imposed in the aftermath of the Panic of 1929 could begin.

Until in the US we could have a purportedly Democratic administration that was willing to trade away financial system regulation in order to pursue some small bore political successes that sounded good in speeches.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Oct 26th, 2008 at 05:10:59 PM EST
[ Parent ]
goes well with haitian mudpies...

actually, i drink orzo (barley coffee) all the time. made in an espresso machine it has all the black ink factor of cawfee, without the adrenal slash'n'burn.

acorns, on the other hand are going to take more getting used to...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Oct 25th, 2008 at 08:20:36 PM EST
[ Parent ]
Are we talking about rescuing just the US banks?

$35 trillion is about 3 times the US GDP and between 1/2 and 2/3 of world GDP depending on the estimates.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Sun Oct 26th, 2008 at 05:02:29 PM EST
[ Parent ]

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