ALL have forgotten this magic formula !

[icm63]

50 years ago it took $1 of debt for $1 GDP
25 years ago it took $2 of debt for $1 GDP
10 years ago it took $3 of debt for $1 GDP
Today it takes $5 of debt for $1 GDP

[note: these numbers maybe not exact, but the trend is the same]

TO get asset price inflation back on the road again, this trend will need to be accelerated.

Two recent house price crashes:
- Japan has never recovered from its housing price crash from the 1990's.
- In England from 1990 to 1996 the house price index fell 25%, but recovered by 2000 and went up 150% to 2008 - In the early 1990s the bank of england was bailed out by the govt. The UK recovered only through massive debt explosion.

The Uk example has shown that it is a really large boom and bust cycle. When happy times are here again, leaders do not have a any politcial will to control easy money.

My Point: $700 BN wont be the end of the debt juice to get asset price inflation back on the road again. More like $7,000 BN !

Me thinks the commies in China and Russia have a better chance for RULING the world as the economies will be less debt ridden ! Smell a WW3 coming ! (oops USA will have to borrow to fight, just like England did in WW2)

Note: I am outside USA, I do not hold a USA passport.

[grapejelly]

Re: ALL have forgotten this magic formula !

very good points, thank you.

[Supercilious]

Re: ALL have forgotten this magic formula !

icm63, I believe you are missing some important elements here:

50 years ago it too $1 of debt for $1 GDP

(and in 68 Floating Breton Woods +'71 Nixon shock)

25 years ago it too $2 of debt for $1 GDP

Yup, but:
http://www.pbs.org/wgbh/pages/frontl...ll/demise.html
In the spring of 1987, the Federal Reserve Board votes 3-2 in favor of easing regulations under Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker. The vote comes after the Fed Board hears proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities. Thomas Theobald, then vice chairman of Citicorp, argues that three "outside checks" on corporate misbehavior had emerged since 1933: "a very effective" SEC:eek:; knowledgeable investors , and "very sophisticated" rating agencies.

10 years ago it too $3 of debt for $1 GDP

Breton Woods II agreement : Chinese Renmimbi peged to the dollar and double free trade agreement (the chinese free to dump subsidized trash in Wlmart, Wall Street free to ship American jobs to China, and build a bubble manufacturing industry)

In December 1996, with the support of Chairman Alan Greenspan, the Federal Reserve Board issues a precedent-shattering decision permitting bank holding companies to own investment bank affiliates with up to 25 percent of their business in securities underwriting (up from 10 percent).
This expansion of the loophole created by the Fed's 1987 reinterpretation of Section 20 of Glass-Steagall effectively renders Glass-Steagall obsolete. Virtually any bank holding company wanting to engage in securities business would be able to stay under the 25 percent limit on revenue.
[...]
[In 1999] After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.

Today it takes $5 of debt for $1 GDP

Duh!!! GWB, Iraq war, Bernanke, moronic do-nothing Congress.

icm63, it's all fundamentals

(good observation by the way)

[phirang]

Re: ALL have forgotten this magic formula !

icm63, I believe you are missing some important elements here:


(and in 68 Floating Breton Woods +'71 Nixon shock)


Yup, but:
http://www.pbs.org/wgbh/pages/frontl...ll/demise.html
In the spring of 1987, the Federal Reserve Board votes 3-2 in favor of easing regulations under Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker. The vote comes after the Fed Board hears proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities. Thomas Theobald, then vice chairman of Citicorp, argues that three "outside checks" on corporate misbehavior had emerged since 1933: "a very effective" SEC:eek:; knowledgeable investors , and "very sophisticated" rating agencies.


Breton Woods II agreement : Chinese Renmimbi peged to the dollar and double free trade agreement (the chinese free to dump subsidized trash in Wlmart, Wall Street free to ship American jobs to China, and build a bubble manufacturing industry)

In December 1996, with the support of Chairman Alan Greenspan, the Federal Reserve Board issues a precedent-shattering decision permitting bank holding companies to own investment bank affiliates with up to 25 percent of their business in securities underwriting (up from 10 percent).
This expansion of the loophole created by the Fed's 1987 reinterpretation of Section 20 of Glass-Steagall effectively renders Glass-Steagall obsolete. Virtually any bank holding company wanting to engage in securities business would be able to stay under the 25 percent limit on revenue.
[...]
[In 1999] After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.


Duh!!! GWB, Iraq war, Bernanke, moronic do-nothing Congress.

icm63, it's all fundamentals

(good observation by the way)

Buffet is long GS... this ought to help precipitate a reaction from Congress.

[icm63]

Re: ALL have forgotten this magic formula !

Dear

$#* Senior iTuliper

My research was not a good as yours, but i just wanted to highlight this trend.

USA is a crack debt whore (Sorry if this considered bad language), we must get her into Hollywood rehab ! It seams the drug dealers (debt buyers from Asia) keep supply the funds for her addiction.

When does it stop, I am watching the 30 yr bond, mortgage rates, to see if the debt buying market want more return for their risk. If they dont the are very stupid !

[Supercilious]

Re: ALL have forgotten this magic formula !

Buffet is long GS... this ought to help precipitate a reaction from Congress.

Not sure I about that , it looks more looks like and exhausted Tier-3 majority asset being passed to the faithful Tier-3 minority. Goldman is still needed for all OTC unregulated market business.

[Supercilious]

Re: ALL have forgotten this magic formula !

My research was not a good as yours, but i just wanted to highlight this trend.

icm63 I was not sarcastic towards you. I'm just blowing steam seeing all the crooks in government and Wall Street in collusion to rob the whole world starting with America. I apologize if I offended you in any way. Your point was very good.

Just watched some idiots on Bloomberg saying the same lies over and over again and felt my blood rising :mad: (.... $700 baillout is too low , we well need more , and for all the drama and rethoric ..... what a bunch of scumbags)

[icm63]

Re: ALL have forgotten this magic formula !

NO worries dude, have a nice day !

[D-Mack]

Re: ALL have forgotten this magic formula !

icm63, I believe you are missing some important elements here:


(and in 68 Floating Breton Woods +'71 Nixon shock)


Yup, but:
http://www.pbs.org/wgbh/pages/frontl...ll/demise.html
In the spring of 1987, the Federal Reserve Board votes 3-2 in favor of easing regulations under Glass-Steagall Act, overriding the opposition of Chairman Paul Volcker. The vote comes after the Fed Board hears proposals from Citicorp, J.P. Morgan and Bankers Trust advocating the loosening of Glass-Steagall restrictions to allow banks to handle several underwriting businesses, including commercial paper, municipal revenue bonds, and mortgage-backed securities. Thomas Theobald, then vice chairman of Citicorp, argues that three "outside checks" on corporate misbehavior had emerged since 1933: "a very effective" SEC:eek:; knowledgeable investors , and "very sophisticated" rating agencies.


Breton Woods II agreement : Chinese Renmimbi peged to the dollar and double free trade agreement (the chinese free to dump subsidized trash in Wlmart, Wall Street free to ship American jobs to China, and build a bubble manufacturing industry)

In December 1996, with the support of Chairman Alan Greenspan, the Federal Reserve Board issues a precedent-shattering decision permitting bank holding companies to own investment bank affiliates with up to 25 percent of their business in securities underwriting (up from 10 percent).
This expansion of the loophole created by the Fed's 1987 reinterpretation of Section 20 of Glass-Steagall effectively renders Glass-Steagall obsolete. Virtually any bank holding company wanting to engage in securities business would be able to stay under the 25 percent limit on revenue.
[...]
[In 1999] After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic.


Duh!!! GWB, Iraq war, Bernanke, moronic do-nothing Congress.

icm63, it's all fundamentals

(good observation by the way)

What role did Volcker play by raising interest rates ? Many blame him for helping to get industry out of the US.