[quote=livinincali][quote=The-Shoveler]Maybe that was why the posturing Ben was doing today, talking about the need to for easier lending standards,
Maybe a move to get additional funding.
Housing is all about credit markets (well and inflation).[/quote]
The problem is that all the growth in the economy for the past 20-30 years has come from increases in debt. If you back out the debt the economy has been shrinking. The entire goal of the fed is to trick people into taking on debt or at least spending every penny they have to grow the economy. 40-50 years ago growth came from saved capital, now it comes from debt. Now that the masses cannot or will not participate the leaders are getting desperate because they fully understand that all assets are priced in credit/debt. If that debt has to be liquidated then all the assets are going to fall in price,the big banks are going to go bankrupt and the masses are going to revolt because their retirement depends on that debt backed wealth. I.e. their retirement depends on their children and grand children to be obligated to produce them goods and services in the future. What better way that larding on student loan and government debt.
In essence people are holding wealth backed by debt and the debtors can’t pay in full so much of the wealth needs to be discounted. The big banks are playing a game of musical chairs in which they hope to be the one that isn’t holding the empty bag when the music stops. They are putting the taxpayer on the hook slowly over time. In my opinion the fed’s QE game is essentially a counterfeiting operation that has to walk the fine line between stimulating demand and not being detectable in prices. I.e. similar to somebody counterfeiting a million dollars in $5 bills and spending little bits here and there so that they don’t draw attention.[/quote]
That’s a pretty good explanation of wealth backed by debt, livinincali.
But if there is a debtor, there needs to be the counter-party creditor.
In this situation, who is the creditor? folks who buy the treasury bonds?
Is it the banks? The FED? Treasury? Foreign governments that peg their currency to dollar?
How are they going to react once they find out that there is very little for them to claim in terms of what they lent against (i.e. assets)?