Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

[audrey_girl]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

Yes, I'm being intentionally provocative here, and glad I've smoked out comments from members of the community we have not heard from before.

Consider our unfortunate situation.

On the minus side:

• The FIRE Economy is collapsing
• Unemployment is rising rapidly
• We have minimal savings
• Our credit is in question

On the plus side:

• We have a surfeit of human capital, millions of well educated people who are willing to work hard
• We have strong institutions that took generations to develop, albeit under marginal management lately
• We have a strong rule of law, although poorly enforced as of late, especially for property rights, which is why so much is invented here

What to do to build for the future? How to finance it?

Dear EJ -

You forgot another plus...

the corrupt, self-serving, bought and paid for, asleep at the wheel corporate media is also going the way of the dinosaur:


http://newsosaur.blogspot.com/2008/0...ock-value.html

[jtabeb]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

What to do to build for the future? How to finance it?

ONE way dude, and ONE way ONLY.

Kill the third "bank of the united states" the FED, and do direct governement debt issue as JFK with silver notes. No more PRIVATE issuance of credit. Banks still exist but the are ONLY INTERMEDIARIES between the US ISSUED (not fed issued) credit and the borrower. They become middle men, not issuers of debt.

This requires a two tiered structure for US Gov Debt, T-bills and Bonds, on the lower tier, and Gold Backed infrastructure and Green energy notes as the top tier. (Super senior debt collateralized by the US Gold reserves)

Make the transfer of PMs into currency (sale to the Government ONLY) a NON TAXABLE event for anyone (even foreigners, drag the ALL worlds gold over here in the process, not a bad idea if you ask me) , people would sell their PM's to buy things (and they would buy things, trust me, (I feel I am uniquely qualified to speak in that reguard as an ALL IN PM holder, I want to buy a house and a FARM, and an airplane factory to make these http://en.wikipedia.org/wiki/Berkut_360)

Kill the fraud that is COMEX, ban uncollateralized futures trading (if you don't own it, you can't short it, or go long, make it a true risk hedging market like it was supposed to be in the first damn place.)

Re-instate the up-tic rule.

Bail out debtors with Tier two US notes (give debtors the inflation they need to get out from under the debt burden)

Revalue the Gold reserves at 5-10x current spot prices, issues these notes collateralized by GOLD (and the infrastructure, lender's choice of terms of redeement on the notes, e.g. they can CHOOSE to be paid in dollars or gold), that's it, the only way. (this is the Tier One Super senior US debt collateralized by the US GOLD reserves)

Eventually end up at a multi-metallic currency system for the dollar exchange mechanism. Gold, Silver, Plat, Palladium are all free to fluctuate in value against each other AND the Dollar. Each is freely convertible into any other as a NON-taxable event. Purchases of things in the economy ,real or otherwise ,are ONLY allowed in DOLLARS. So savings units (multi-metallics) must be transferred into dollars before the savings that these represent can actually be used. (Banks chartered in the above manner would be PERFECT for this role).

Foreign nations would be forgiven if they think we might pull a "fast one" so the only way to guarentee the security of their principle is to collateralize the loan with gold (they can get a nominal return in dollars too, if the so choose, should the plan be wildly successful, see abovel).

Honestly,

Without Debt forgivness, increasing the social support net, and the above, we are well and truely fucked.

I hope to god someone is listening, but I'm not delusional.

I wish SOMEONE could arrange a meeting between steve keen, michael hudson and Obama.

If he LISTENED to the information that these two would provide, I would be quite enthusiactic actually about our prospects for recovery.

As you mention, I think a solution is EASY, it is the inability to FORCE all the above into being due to the political situation that is what is going to kill us.

I think there are a number of WORKABLE solutions that could all be successful. But they won't happen, just as the above won't happen, because of the lack of a mandate and action.

Don't ever kid yourself EJ, finding a workable and VIABLE, and ultimately SUCCESSFUL solution WAS and NEVER HAS BEEN the problem. (you said so yourself)

It's the impossibility of implementation due to conflicts of finacial interests that's the issue. Always has been, Maybe always will.

So for now, I'm sticking with gold and guns. ( I would change if the above were true, and I know A LOT of PMers would)

Hope that answers your question.

P.S. Don't piss off china and the ME debt holders and Japan, give them first shot and trading in their OLD treasuries for NEW NOTES (after revaluation) before any one else. Got to keep the oil suppliers happy and the Consumer products producers happy (and give them a reason to go a long.

A Win -Win is the ONLY way this works out, if we fuck people, well let's just say I don't think we will get another chance to fuck other countries after doing so so many times.

1933, 1971, Today, we've got a bad rap and we have to MAKE IT WORTH their while to help us. Otherwise, DOOM GLOOM AND BOOM would be a HAPPY FANTASY compared with what we will end up with.

V/R
JT


Added:

http://www.safehaven.com/article-12773.htm

This seems like a good idea as well.

[cjppjc]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

Where are the show trials?

[Rajiv]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

EJ,

What about interviewing Emmanuel Saez from Berkeley? Possibly William Domhoff from UC Santa Cruz

[MarkL]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

These bonds can use the accumulated savings within the FIRE sector to finance the reconstruction of a new, productive economy .... It will then be the duty of Americans who can afford to buy them to do so, to each according to his means. That is the American way out of a mess like this, with a fair sharing of the burdens of cost.

With "Poom" coming wouldn't buying these bonds be foolish unless they happened to be inflation adjusted? Even then it'd need to be off the PPI, not the CPI. All debt will be deflated when Poom hits, right Eric?

[goadam1]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

wow. The "burn, baby, burn" crowd has the floor here. Punish them all, right?

I would easily use a good portion of my capital and buy a "build-a-bond." Think of it as war bonds. What happened to common interest? What happened to thinking of the greater good? You should as an example, pay taxes to immunize your neighbors' kid, not just because it is right, but because you benefit from him not having a disease.

I thought we were Jeffersonian around here.

[goadam1]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

If all post-war recessions were centered around over production of housing, then is there any business we can really invest in besides "growth?"

[goadam1]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

The question is: is it worth it to have the good of the many outweigh the costs of a few? Didn't anyone see, "Wraith of Khan."

Not all solutions can come from every market player running for cover. You can't build a new future hiding it all under the bed.

[Rajiv]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

wow. The "burn, baby, burn" crowd has the floor here. Punish them all, right?

I hope you didn't equate me with the "burn, baby, burn" crowd -- I have never been in favor of burning babies! ;)

[Down Under]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

There was a time when companies were built entirely from profits - I believe Louis Renault didn't borrow a dime. maybe we can't go back to those halcyon days but the thinking is right.

Cisco is one such company. Story of Cisco is that in the early days, it raised some venture capital money, think it would be needed for expansion etc, and sold a large chunk of the company in return.

The VC money was never needed; it simply sat in the bank and was never spent. Truly amazing.

[Down Under]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

Kill the third "bank of the united states" the FED, and do direct governement debt issue as JFK with silver notes. No more PRIVATE issuance of credit. Banks still exist but the are ONLY INTERMEDIARIES between the US ISSUED (not fed issued) credit and the borrower. They become middle men, not issuers of debt.

Yer, well a bit of honesty and integrity would sure help, now, wouldn't it.

Honesty and integrity, more or less a summary of all that you've said.

[Down Under]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

I would easily use a good portion of my capital and buy a "build-a-bond." Think of it as war bonds. What happened to common interest? What happened to thinking of the greater good? You should as an example, pay taxes to immunize your neighbors' kid, not just because it is right, but because you benefit from him not having a disease.

I thought we were Jeffersonian around here.

I would like to see a bit of accountablity.

[nael]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

Yes, I'm being intentionally provocative here, and glad I've smoked out comments from members of the community we have not heard from before.

Consider our unfortunate situation.

On the minus side:

• The FIRE Economy is collapsing
• Unemployment is rising rapidly
• We have minimal savings
• Our credit is in question

On the plus side:

• We have a surfeit of human capital, millions of well educated people who are willing to work hard
• We have strong institutions that took generations to develop, albeit under marginal management lately
• We have a strong rule of law, although poorly enforced as of late, especially for property rights, which is why so much is invented here

What to do to build for the future? How to finance it?

EJ,

I’m new to the site , I've been an observer for about 3 months, this is my first post.
I have been following your comments very closely and they are greatly appreciated. I believe that only you, Steve Keen and Michael Hudson really have an in depth understanding of the many dynamics of the unfolding catastrophe.
Unfortunately Steve Keen is focusing a lot on Australia (if you can, you should interview him more often or have a monthly contribution from Keen on general topics non Australian) but his comments are nonetheless very interesting even when they are on Australia.
Michael Hudson is also very interesting but particularly when you are interviewing him and he does not digress too much towards his absolute hatred of the FIRE economy actors (although he has many valid points on the topic).
But I believe you manage to have a pragmatic approach on a very solid intellectual/academic base and you focus your work on topics that are most relevant to the itulip community (ie, our survival). So thank you for being a beacon of light in this increasingly darker world that we live in.
I have the following question/argument which as you will see his based on your writings:
How can the US consumers do anything else than try to frantically reduce his suffocating debt level/burden in view of:
- Household savings sufficient to finance cash flow for ONLY two months (from your "Modern Depression: Focus on US GDP" article. How does this compare with 18 days figure from your Dual Cycles of Demand Destruction and the Economic Face Plant article.)
- Household debt service as % of disposable income higher than great depression level (Dalio’s interview in Barron’s)
- falling income and sky rocketing unemployment
Hence today any US consumer investment whether in T-bills (to replace foreign creditors when the “Road to Ruin” sudden stop will happen) or Infrastructure bonds can only happen after a “steve keen” type politically unthinkable general debt reduction.
The IMF calculated that should the personal saving rate rise to 8% by 2010 that creates only 830 Bn $ of savings available and even if you add an estimated 500 Bn $ from foreigner (I think unrealistically high in view of collapsing export worldwide), that’s 1.3 Trillion $ of possible t-bill purchases out of a government funding need of 4 TN $ over 2009/2010 (argument made by gaius marius on Setser’s blog). I believe that the 4 TN $ figures of funding the US government needs is seriously underestimating the loss of tax receipt the likely 24% decrease ("Modern Depression: Focus on US GDP" article ). Specially that in case personal saving rate rise to 8% by 2010 this will most probably lead to a worst case scenario type GDP contraction of 15% (again gaius marius on the brad setster blog but I believe this is also close to a roubini estimate).
I don’t think they are enough “Americans who can afford it “to finance the upcoming fiscal deficit of us government.
I don’t see how the US hyper inflation scenario can be avoided except that it might not necessarily mean an automatic dollar crash as the euro might disintegrate beforehand (with the possible secret 25 Trillion $ of impaired assets see last part of interesting presentation in http://www.arpllp.com/core_files/The...ter%200309.pdf ).
So we will either be in a world where domestic hyper inflated USA will look like a safe haven compared to the rest or no more fiduciary currency and back to the gold standard with gold at 5000$ with the added bonus of monetizing a good chunk of US debt.

[BiscayneSunrise]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

So Eric,

Regarding these infrastructure bonds, what kinds of interest rates should they offer to attract investors?

In WW2, war bonds were offered at lower than market rates but people bought them anyway to do their part. Given that the investor class is currently on strike, it seems like that today, you'd have to offer them at much higher than current rates.

Possible scenario: Infrastructure bonds offered at let's say 7% tax free, then the money lent at 5%. Sure the feds would have to cover the cost of the 5% point difference but that would be cheaper than running trillion dollar deficits.

[Sharky]

Re: Can Anything Bring Down the Monthly Payment Consumer? Revisited - Eric Janszen

On the minus side:

• The FIRE Economy is collapsing
• Unemployment is rising rapidly
• We have minimal savings
• Our credit is in question

I would add:

• Way too much debt

On the plus side:

• We have a surfeit of human capital, millions of well educated people who are willing to work hard
• We have strong institutions that took generations to develop, albeit under marginal management lately
• We have a strong rule of law, although poorly enforced as of late, especially for property rights, which is why so much is invented here

What to do to build for the future? How to finance it?

The issue of current laws being poorly enforced is a huge one. I would argue that that the current situation has directly undermined what used to be a "strong rule of law." Now it seems that all you need to do to get away with a crime is to make it big enough. If someone walks into my house and steals $10, they go to jail. If someone else destroys my bank, my neighborhood and my life savings with fraudulent loans, they get a slap on the wrist and a big bailout.

IMO, one of the first things that needs to be done is to enforce laws already on the books. For example, people who lied on their mortgage applications, bankers and their agents who knowingly accepted those loans, should be brought up on charges. Mortgage fraud is a felony. Current law does not allow criminals to financially benefit from their crimes. The fees they obtained should be clawed back even if already spent, etc, etc.

Also, transparency and accounting honesty need to be established. Who owns toxic assets? As things are now, the market seems to be assuming that everyone does. You can't believe anyone's financial statements any more, and the level of market manipulation that's happening is beyond criminal. As long as that continues, the capital markets are dead.

Americans need to rediscover their roots. In particular, sound money, individual rights and the fact that wealth flows from production. You don't get rich by borrowing-and-spending or with a service-based economy. You get rich by making things and selling them. And it's not just the wealthy that get rich(er) in a production-based economy, it's everyone.

Unfortunately, I don't think any of this is going to happen without a BIG housecleaning in Congress. And that chances of that happening are, well, pretty damn small.