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July 16, 2010 at 7:13 PM #580274July 16, 2010 at 7:42 PM #579248
jpinpb
Participantrich – in your example you are using stocks. How about if we substitute it w/housing. People DID have the money available to them in the form of HELOCs that were used and spent in the economy.
It, in effect, was used as income that kept the economy going, b/c surely most wages were flat (exception for realtors, appraisers, finance and maybe include them in the HELOC supplement, too) though jobs were plentiful thanks to housing.
This phenomena continued for years as housing prices continued to rise. It was a supplement, if you will, to their incomes. It was money that they took every so often from their equity and spent freely and excessively.
Now we have the reversal of that. No money flowing.
Now take the government. I can’t even keep track of how much they have spent, but pales in comparison to all the money circulating in the last bubble. And sure they can print 11 trillion. But it has to be money that’s circulated and spent. I’m not seeing that happen to the degree of our bubble. (thank goodness)
The correction, IMO, needs to take place b/c the bubble was unsustainable and though it may be somewhat painful, throwing more money at a bubble to keep it going doesn’t seem like the answer. Maybe I’m just crazy for thinking this. I don’t know.
July 16, 2010 at 7:42 PM #579341Participantrich – in your example you are using stocks. How about if we substitute it w/housing. People DID have the money available to them in the form of HELOCs that were used and spent in the economy.
It, in effect, was used as income that kept the economy going, b/c surely most wages were flat (exception for realtors, appraisers, finance and maybe include them in the HELOC supplement, too) though jobs were plentiful thanks to housing.
This phenomena continued for years as housing prices continued to rise. It was a supplement, if you will, to their incomes. It was money that they took every so often from their equity and spent freely and excessively.
Now we have the reversal of that. No money flowing.
Now take the government. I can’t even keep track of how much they have spent, but pales in comparison to all the money circulating in the last bubble. And sure they can print 11 trillion. But it has to be money that’s circulated and spent. I’m not seeing that happen to the degree of our bubble. (thank goodness)
The correction, IMO, needs to take place b/c the bubble was unsustainable and though it may be somewhat painful, throwing more money at a bubble to keep it going doesn’t seem like the answer. Maybe I’m just crazy for thinking this. I don’t know.
July 16, 2010 at 7:42 PM #579873Participantrich – in your example you are using stocks. How about if we substitute it w/housing. People DID have the money available to them in the form of HELOCs that were used and spent in the economy.
It, in effect, was used as income that kept the economy going, b/c surely most wages were flat (exception for realtors, appraisers, finance and maybe include them in the HELOC supplement, too) though jobs were plentiful thanks to housing.
This phenomena continued for years as housing prices continued to rise. It was a supplement, if you will, to their incomes. It was money that they took every so often from their equity and spent freely and excessively.
Now we have the reversal of that. No money flowing.
Now take the government. I can’t even keep track of how much they have spent, but pales in comparison to all the money circulating in the last bubble. And sure they can print 11 trillion. But it has to be money that’s circulated and spent. I’m not seeing that happen to the degree of our bubble. (thank goodness)
The correction, IMO, needs to take place b/c the bubble was unsustainable and though it may be somewhat painful, throwing more money at a bubble to keep it going doesn’t seem like the answer. Maybe I’m just crazy for thinking this. I don’t know.
July 16, 2010 at 7:42 PM #579980Participantrich – in your example you are using stocks. How about if we substitute it w/housing. People DID have the money available to them in the form of HELOCs that were used and spent in the economy.
It, in effect, was used as income that kept the economy going, b/c surely most wages were flat (exception for realtors, appraisers, finance and maybe include them in the HELOC supplement, too) though jobs were plentiful thanks to housing.
This phenomena continued for years as housing prices continued to rise. It was a supplement, if you will, to their incomes. It was money that they took every so often from their equity and spent freely and excessively.
Now we have the reversal of that. No money flowing.
Now take the government. I can’t even keep track of how much they have spent, but pales in comparison to all the money circulating in the last bubble. And sure they can print 11 trillion. But it has to be money that’s circulated and spent. I’m not seeing that happen to the degree of our bubble. (thank goodness)
The correction, IMO, needs to take place b/c the bubble was unsustainable and though it may be somewhat painful, throwing more money at a bubble to keep it going doesn’t seem like the answer. Maybe I’m just crazy for thinking this. I don’t know.
July 16, 2010 at 7:42 PM #580284Participantrich – in your example you are using stocks. How about if we substitute it w/housing. People DID have the money available to them in the form of HELOCs that were used and spent in the economy.
It, in effect, was used as income that kept the economy going, b/c surely most wages were flat (exception for realtors, appraisers, finance and maybe include them in the HELOC supplement, too) though jobs were plentiful thanks to housing.
This phenomena continued for years as housing prices continued to rise. It was a supplement, if you will, to their incomes. It was money that they took every so often from their equity and spent freely and excessively.
Now we have the reversal of that. No money flowing.
Now take the government. I can’t even keep track of how much they have spent, but pales in comparison to all the money circulating in the last bubble. And sure they can print 11 trillion. But it has to be money that’s circulated and spent. I’m not seeing that happen to the degree of our bubble. (thank goodness)
The correction, IMO, needs to take place b/c the bubble was unsustainable and though it may be somewhat painful, throwing more money at a bubble to keep it going doesn’t seem like the answer. Maybe I’m just crazy for thinking this. I don’t know.
July 16, 2010 at 10:32 PM #579287
Rich ToscanoKeymasterJP –
OK, let’s substitute housing. Let’s say that home prices go down. Did any money disappear? NO. Absolutely not.
It is true that it’s harder for banks to create new money via HELOCs because now the collateral (homes) are lower in value. But a reduced ability to create new money in the future is NOT THE SAME as a decrease in the supply of existing money. I covered this in detail in the article I linked to in my prior comment.
The rest of your post consists of multiple assertions that I’m not sure what to make of — ie. are you suggesting that I have argued that the bubble was not unsustainable, or that I think it’s a good idea to throw money at it to keep prices propped up? I certainly hope you aren’t under the impression that I believe such things.
Cyphire posted that a decrease in asset values decreases the money supply. I posted in reply to point out that this was not the case. I never said that the bubble was sustainable or that the government should throw money at it (not in this thread, or ever!)
I also don’t understand the assertion that the amount of money in the economy pales in comparison to the bubble. The fact is that the money supply has increased quite dramatically since the bubble ended. People aren’t spending the money as quickly because of the weak economy, but there is more money out there now than there ever was during the bubble, by a huge margin. Here is a chart of M2, a widely used monetary aggregate, to illustrate this:
As I’ve argued many times, and at great length (notably in the two-part series whose second part I linked to above), the Fed is fully committed to increasing the money supply and is entirely capable of doing so. Given that the money supply grew substantially in the face of generational asset price declines, I’m not even sure why this is a matter of debate any more.
July 16, 2010 at 10:32 PM #579382Rich ToscanoKeymasterJP –
OK, let’s substitute housing. Let’s say that home prices go down. Did any money disappear? NO. Absolutely not.
It is true that it’s harder for banks to create new money via HELOCs because now the collateral (homes) are lower in value. But a reduced ability to create new money in the future is NOT THE SAME as a decrease in the supply of existing money. I covered this in detail in the article I linked to in my prior comment.
The rest of your post consists of multiple assertions that I’m not sure what to make of — ie. are you suggesting that I have argued that the bubble was not unsustainable, or that I think it’s a good idea to throw money at it to keep prices propped up? I certainly hope you aren’t under the impression that I believe such things.
Cyphire posted that a decrease in asset values decreases the money supply. I posted in reply to point out that this was not the case. I never said that the bubble was sustainable or that the government should throw money at it (not in this thread, or ever!)
I also don’t understand the assertion that the amount of money in the economy pales in comparison to the bubble. The fact is that the money supply has increased quite dramatically since the bubble ended. People aren’t spending the money as quickly because of the weak economy, but there is more money out there now than there ever was during the bubble, by a huge margin. Here is a chart of M2, a widely used monetary aggregate, to illustrate this:
As I’ve argued many times, and at great length (notably in the two-part series whose second part I linked to above), the Fed is fully committed to increasing the money supply and is entirely capable of doing so. Given that the money supply grew substantially in the face of generational asset price declines, I’m not even sure why this is a matter of debate any more.
July 16, 2010 at 10:32 PM #579913Rich ToscanoKeymasterJP –
OK, let’s substitute housing. Let’s say that home prices go down. Did any money disappear? NO. Absolutely not.
It is true that it’s harder for banks to create new money via HELOCs because now the collateral (homes) are lower in value. But a reduced ability to create new money in the future is NOT THE SAME as a decrease in the supply of existing money. I covered this in detail in the article I linked to in my prior comment.
The rest of your post consists of multiple assertions that I’m not sure what to make of — ie. are you suggesting that I have argued that the bubble was not unsustainable, or that I think it’s a good idea to throw money at it to keep prices propped up? I certainly hope you aren’t under the impression that I believe such things.
Cyphire posted that a decrease in asset values decreases the money supply. I posted in reply to point out that this was not the case. I never said that the bubble was sustainable or that the government should throw money at it (not in this thread, or ever!)
I also don’t understand the assertion that the amount of money in the economy pales in comparison to the bubble. The fact is that the money supply has increased quite dramatically since the bubble ended. People aren’t spending the money as quickly because of the weak economy, but there is more money out there now than there ever was during the bubble, by a huge margin. Here is a chart of M2, a widely used monetary aggregate, to illustrate this:
As I’ve argued many times, and at great length (notably in the two-part series whose second part I linked to above), the Fed is fully committed to increasing the money supply and is entirely capable of doing so. Given that the money supply grew substantially in the face of generational asset price declines, I’m not even sure why this is a matter of debate any more.
July 16, 2010 at 10:32 PM #580019Rich ToscanoKeymasterJP –
OK, let’s substitute housing. Let’s say that home prices go down. Did any money disappear? NO. Absolutely not.
It is true that it’s harder for banks to create new money via HELOCs because now the collateral (homes) are lower in value. But a reduced ability to create new money in the future is NOT THE SAME as a decrease in the supply of existing money. I covered this in detail in the article I linked to in my prior comment.
The rest of your post consists of multiple assertions that I’m not sure what to make of — ie. are you suggesting that I have argued that the bubble was not unsustainable, or that I think it’s a good idea to throw money at it to keep prices propped up? I certainly hope you aren’t under the impression that I believe such things.
Cyphire posted that a decrease in asset values decreases the money supply. I posted in reply to point out that this was not the case. I never said that the bubble was sustainable or that the government should throw money at it (not in this thread, or ever!)
I also don’t understand the assertion that the amount of money in the economy pales in comparison to the bubble. The fact is that the money supply has increased quite dramatically since the bubble ended. People aren’t spending the money as quickly because of the weak economy, but there is more money out there now than there ever was during the bubble, by a huge margin. Here is a chart of M2, a widely used monetary aggregate, to illustrate this:
As I’ve argued many times, and at great length (notably in the two-part series whose second part I linked to above), the Fed is fully committed to increasing the money supply and is entirely capable of doing so. Given that the money supply grew substantially in the face of generational asset price declines, I’m not even sure why this is a matter of debate any more.
July 16, 2010 at 10:32 PM #580323Rich ToscanoKeymasterJP –
OK, let’s substitute housing. Let’s say that home prices go down. Did any money disappear? NO. Absolutely not.
It is true that it’s harder for banks to create new money via HELOCs because now the collateral (homes) are lower in value. But a reduced ability to create new money in the future is NOT THE SAME as a decrease in the supply of existing money. I covered this in detail in the article I linked to in my prior comment.
The rest of your post consists of multiple assertions that I’m not sure what to make of — ie. are you suggesting that I have argued that the bubble was not unsustainable, or that I think it’s a good idea to throw money at it to keep prices propped up? I certainly hope you aren’t under the impression that I believe such things.
Cyphire posted that a decrease in asset values decreases the money supply. I posted in reply to point out that this was not the case. I never said that the bubble was sustainable or that the government should throw money at it (not in this thread, or ever!)
I also don’t understand the assertion that the amount of money in the economy pales in comparison to the bubble. The fact is that the money supply has increased quite dramatically since the bubble ended. People aren’t spending the money as quickly because of the weak economy, but there is more money out there now than there ever was during the bubble, by a huge margin. Here is a chart of M2, a widely used monetary aggregate, to illustrate this:
As I’ve argued many times, and at great length (notably in the two-part series whose second part I linked to above), the Fed is fully committed to increasing the money supply and is entirely capable of doing so. Given that the money supply grew substantially in the face of generational asset price declines, I’m not even sure why this is a matter of debate any more.
July 17, 2010 at 8:46 AM #579342ParticipantRich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)
So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.
While the government is printing a great amount of money, I don’t think it’s being all circulated. Maybe people are buying gold w/it or paying off credit cards or hoarding it in mattresses. I don’t know. Printing money is different than actually getting it circulated. They can print 24/7, but if people don’t have it in their hands and spend it, then how is printing going to help?
For instance, giving the few thousand in tax credits as stimulus would probably get people to spend. But contrast people were spending tens of thousand, hundreds of thousands extracted from their house during the bubble.
Yes, the government is taking on projects. I think this is just going to be less money to the people as they’ll have to pay for the projects through eventual taxation. But that’s another issue for another day.
Maybe we are in that lag period you mention. How long does lag time normally last? Months? Years? True that people *need* to spend money to live, but it is quite different than splurging on unnnecessary *wants*. That’s what was happening during the bubble. And frankly, during the depression, people still needed to live and money wasn’t there to spend. But different economic policies then, I guess.
I understand the money is there – somewhere. Where it went is like a mystery to me. Banks just holding it? Because few are lending the credit on real estate purchases. It’s mostly government FHA.
As being discussed on another thread, consumer index collapsed. It can’t be for lack of government printing.
While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)
So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?
I admit rudimentary knowledge on this topic. Just
my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.
July 17, 2010 at 8:46 AM #579435ParticipantRich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)
So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.
While the government is printing a great amount of money, I don’t think it’s being all circulated. Maybe people are buying gold w/it or paying off credit cards or hoarding it in mattresses. I don’t know. Printing money is different than actually getting it circulated. They can print 24/7, but if people don’t have it in their hands and spend it, then how is printing going to help?
For instance, giving the few thousand in tax credits as stimulus would probably get people to spend. But contrast people were spending tens of thousand, hundreds of thousands extracted from their house during the bubble.
Yes, the government is taking on projects. I think this is just going to be less money to the people as they’ll have to pay for the projects through eventual taxation. But that’s another issue for another day.
Maybe we are in that lag period you mention. How long does lag time normally last? Months? Years? True that people *need* to spend money to live, but it is quite different than splurging on unnnecessary *wants*. That’s what was happening during the bubble. And frankly, during the depression, people still needed to live and money wasn’t there to spend. But different economic policies then, I guess.
I understand the money is there – somewhere. Where it went is like a mystery to me. Banks just holding it? Because few are lending the credit on real estate purchases. It’s mostly government FHA.
As being discussed on another thread, consumer index collapsed. It can’t be for lack of government printing.
While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)
So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?
I admit rudimentary knowledge on this topic. Just
my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.
July 17, 2010 at 8:46 AM #579967ParticipantRich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)
So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.
While the government is printing a great amount of money, I don’t think it’s being all circulated. Maybe people are buying gold w/it or paying off credit cards or hoarding it in mattresses. I don’t know. Printing money is different than actually getting it circulated. They can print 24/7, but if people don’t have it in their hands and spend it, then how is printing going to help?
For instance, giving the few thousand in tax credits as stimulus would probably get people to spend. But contrast people were spending tens of thousand, hundreds of thousands extracted from their house during the bubble.
Yes, the government is taking on projects. I think this is just going to be less money to the people as they’ll have to pay for the projects through eventual taxation. But that’s another issue for another day.
Maybe we are in that lag period you mention. How long does lag time normally last? Months? Years? True that people *need* to spend money to live, but it is quite different than splurging on unnnecessary *wants*. That’s what was happening during the bubble. And frankly, during the depression, people still needed to live and money wasn’t there to spend. But different economic policies then, I guess.
I understand the money is there – somewhere. Where it went is like a mystery to me. Banks just holding it? Because few are lending the credit on real estate purchases. It’s mostly government FHA.
As being discussed on another thread, consumer index collapsed. It can’t be for lack of government printing.
While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)
So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?
I admit rudimentary knowledge on this topic. Just
my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.
July 17, 2010 at 8:46 AM #580074ParticipantRich – didn’t the money disappear in a sense when housing prices went down in the form of circulation, only b/c the money was being extracted in the form of HELOCs and being spent. They certainly weren’t saving it. (savings lowest in history)
So if the price goes down, wouldn’t you consequently lose your equity extraction and money circulation? People were taking great advantage of that. Not just new, recent bubble buyers. I can’t count how many NODs I’ve come across on properties that were purchased long before our bubble. A few that should have had loans paid off in full.
While the government is printing a great amount of money, I don’t think it’s being all circulated. Maybe people are buying gold w/it or paying off credit cards or hoarding it in mattresses. I don’t know. Printing money is different than actually getting it circulated. They can print 24/7, but if people don’t have it in their hands and spend it, then how is printing going to help?
For instance, giving the few thousand in tax credits as stimulus would probably get people to spend. But contrast people were spending tens of thousand, hundreds of thousands extracted from their house during the bubble.
Yes, the government is taking on projects. I think this is just going to be less money to the people as they’ll have to pay for the projects through eventual taxation. But that’s another issue for another day.
Maybe we are in that lag period you mention. How long does lag time normally last? Months? Years? True that people *need* to spend money to live, but it is quite different than splurging on unnnecessary *wants*. That’s what was happening during the bubble. And frankly, during the depression, people still needed to live and money wasn’t there to spend. But different economic policies then, I guess.
I understand the money is there – somewhere. Where it went is like a mystery to me. Banks just holding it? Because few are lending the credit on real estate purchases. It’s mostly government FHA.
As being discussed on another thread, consumer index collapsed. It can’t be for lack of government printing.
While I understand the decrease of an item does not destroy the ability to purchase, wouldn’t it change the quantity/volume of money circulated (wealth?)
So maybe money supply isn’t the issue. Maybe it’s the distribution and spending?
I admit rudimentary knowledge on this topic. Just
my observations of what’s happening. I would love to understand all this and make sense of it. I always seem to have a difficult time grasping the dynamics of it all and I appreciate your tolerance w/my questions.Thanks for your patience on this topic. I will go back and re-read your links again to see if it sinks in.
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