Chile Forum

StevenDC wrote:I also made the statement that Keynes recognized only one end result applying his principles: the final collapse of the currency. Why is this ignored? Feed me now, I'll pay you Tuesday?

The "real" problem is people have awakened to the fact that "free" money must eventually be paid back... and they don't have it to pay back.

StevenDC wrote:

john wrote:
Since the current economic problem is a lack of demand, .

Partially correct. Lack of demand caused by realization of high debt with no further expectations of buble dynamics allowing an entry of the "Greater Fool" theory exit with profit taking. In other words, the bubble caused by misallocation of leveraged capital under speculation bust and the game of musical chairs just ended.

Fair comments! But the biggest culprits by far is this sorry saga were the "too big to fail" banks and the usual Wall Street suspects.

Again, the basis for the problem is excessive debt and how anyone such as Krugman can espouse that adding more debt will fix a problem caused by excessive debt is beyond me.

I beg to differ! The basis for the problem stems from the bursting of the real estate bubble coupled with the "toxic asset" loans that were the 'brainchild' of the investment bankers on Wall Street.

Of course, it is much more complex than what can be understood by me or written in anything less than a book (certainly not by me).

Yes, it is! However, the current focus on cutting spending with no offsetting tax revenues is a recipe for a 'double dip' recession. I still maintain that job creation should be the major priority at this juncture to absorb the excess capacity in the economy and to prevent negative GDP growth. Without a robust economy the public debt and budget/trade deficits will continue to rise.

Without wealth creation the economy cannot recover no matter what/any amount of money added to the system. Servicing each other is not wealth creation.

You are correct that, over the longer term, the economy must shift from a consumer/service oriented one to a more production oriented one. But that will require a thorough overhaul of our trade agreements with our major trading partners, most notably, China. Are we up to that?

I also made the statement that Keynes recognized only one end result applying his principles: the final collapse of the currency. Why is this ignored? Feed me now, I'll pay you Tuesday?

I cannot comment on this 'statement' from Keynes other than to make the point that his lasting legacy is that, when faced with a looming recession, the Government must step in and stimulate the economy to avert a major recession and the possible threat of a depression. The moral of the story is that markets are not self-correcting.

GJJIM wrote:RE Lord Keynes -- A bit of humor with more than a grain of truth:

http://www.youtube.com/watch?v=GTQnarzmTOc

The common "wisdom" today is that Keynes advocated government spending to boost demand in times when private demand faltered. True, but Keynes also advised governments to build reserves during the good times so they could spend without creating inflation. This is the part of the prescription that current politicians conveniently forget.

Ripsigg wrote:. . . once again debtor prisons are rearing their ugly head in the US.

Andres wrote:

Ripsigg wrote:. . . once again debtor prisons are rearing their ugly head in the US.

I read an interesting comment recently that the entirety of the US is a debtor prison, but unfortunately incarcerates even those individuals/families who attempt to be responsible. That is likely to be more so as time goes by.