No Return to Normal - it's Payback Time | 51 comments (51 topical, editorial, 0 hidden)

Re: No Return to Normal - it's Payback Time (none / 0)

Also, in what sense are these liabilities "money"?

the cosmic scale - 150 trillion dollars - in which interest-bearing credit (aka money) was created

Consider the FDIC's Risk Management Manual of Examination Policies

Additionally, swaps, futures, forwards, and option contracts are derivative instruments whose notional values are carried off-balance sheet, but whose fair values are recorded on the balance sheet.

There is a whole host of "off-balance-sheet" items and not all of them represent actual value.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Mon Mar 23rd, 2009 at 06:33:14 AM EST
[ Parent ]

The $64 Trillion Question... (none / 1)

Migeru:

Also, in what sense are these liabilities "money"?

...and I'm sure you'll get to the bottom of it, if anyone can.

I'm probably out by a factor of ten, but hey, a trillion here and a trillion there, and we're soon talking real money. ;-)

And the system is no less fucked.....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 23rd, 2009 at 06:52:58 AM EST
[ Parent ]

Re: The $64 Trillion Question... (none / 1)

ChrisCook:

I'm sure you'll get to the bottom of it, if anyone can

And here I thought you were the expert...

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Mon Mar 23rd, 2009 at 07:03:58 AM EST
[ Parent ]

Re: The $64 Trillion Question... (none / 1)

I think I am, a bit, but I'm an idle expert of UnSocratic Brain ;-)

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 23rd, 2009 at 08:02:53 AM EST
[ Parent ]

Re: The $64 Trillion Question... (none / 1)

ChrisCook:

I'm probably out by a factor of ten, but hey, a trillion here and a trillion there, and we're soon talking real money. ;-)

Well, there are degrees of fuckedness. A factor of 10 actually matters, because it's the difference between 2 times world GDP which is unpossible and 150% US GDP which while catastrophic might be manageable.

And the system is no less fucked.....

And there are flavours of fuckedness. The fact that there has been a credit binge in the real economy (households and firms) is somewhat independent of the off-balance-sheet black hole created by the finance firms among themselves. Even if there were not $150 trillion in off-balance sheet liabilities for the banking sector, there are few creditworthy households and firms left because everyone is maxed-out on their credit. That is one flavour of fuckedness that cannot be fixed except by waiting. The other flavour of fuckedness is the $150 trillion black hole. BruceMcF has suggested a way of severing the link between the money-center, deposit, payment-clearing part of banking and the rest. That is a flavour of fuckedness that can be fixed.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

by Carrie (migeru at eurotrib dot com) on Mon Mar 23rd, 2009 at 07:19:42 AM EST
[ Parent ]

Re: The $64 Trillion Question... (none / 1)

Don't forget the table ignores CDO's etc. When a CDS is used "legitimately" as a temporary guarantee of a real world obligation then it is usually ultimately (implicitly) backed by land rental value.

The question is how much of the $150 trillion is pure punting?

Also we're only looking at dollars. Lots of other bubbles out there denominated in other currencies..

Another way of getting to the scale of the excess bubble money is to look at the value of the asset bubble. ie the area over time between the actual property price curve and a lower property price curve based on sane or at least, historic leverage levels.

Property prices should, all else being equal, keep track with wages, since that's what people pay mortgages and rents with.

As for fixing creditworthiness, that's why we should not be looking so much at taxing and redistributing earned income, but rather we should be looking at taxing and pre-distributing capital (and hence unearned income), though taxing the privileges of private property and limited liability that give rise to capital.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 23rd, 2009 at 08:00:59 AM EST
[ Parent ]

No Return to Normal - it's Payback Time | 51 comments (51 topical, 0 editorial, 0 hidden)

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