bostonbubble.com

[GenXer]

john_p, you'll love this chart:

http://advisorperspectives.com/commentaries/dshort_061610.php

[john p]

Thanks. I do. I am going to look more closely when I get more time.

I think of two things, first, a wet harvest of cranberries, and second the measure of a substance in parts per million.

Let's say your debt is like a certain type of pollution, say 50 parts. If you have a million total parts, the concentration is 50 parts per million. Now, what if you double the size of the million parts to two million, that now makes the concentration 25 parts per million. Bottom line is that when you put out inflationary policy you get a short term bounce where you dillute the debt by flooding the market with capital which reduces the debt to GDP for a period.

In a wet harvest of cranberries, they have flat bogs surrounded by trenches and earth berms. These bogs are built in stepped levels and they sequence the flooding to move the water down from one to the next. Basically, when they flood the bogs the water plucks the fruit off and the fruit floats to the surface and the wind pulls the cranberries across where they get scooped up by illegal immigrants (sorry to my p.c. friends "Undocumented Workers"). Anyway, Democrats like Keynes's economic philosophy, most recently articulated by Nobel Peace Prize winner Paul Krugman who wants more Stimulus.

From the book MPR recommended to me about the anatomy of a financial crisis (Cooper's book), it talked about the Rational Market Theory, that people believe that markets will settle and get back to a normal state naturally. Others like Minsky (I think) talked about how markets are naturally turbulent and need the grown up's hand to serve as bumpers to keep things on track. I think that the people who think they are "grown-ups" do gooders who mean well are the ones knocking things out of balance. I also believe that if at the individual level, people don't believe in a Rational Market, they will end up behaving irrationally. When Alan Greenspan lowered the reserve rates, it flooded the market with money which is why the debt to GDP went lower, but people then behaved like idiots because there was no footing to rational rules. I mean how do you "play by the rules", when the rules were all changed and you had no control. I think many felt that if I'm fucked, so isn't everyone else and "they'll" have to do something because they're not going to let everyone get fucked. This honestly weighed into my mind to some degree. I felt that there were so many people fucked that we'd eventually need an inflation policy to dillute the debt away and I just picked a house price where the combination of high price and lower interest was what I thought in the end it would be with the reverse, lower price with higher interest which I thought would be the future. I assumed I'd get a bit of salary growth with inflation, because that was the only real long term solution.

What inhibits this is the bank's fear that if we bail out the irresponsible, it will create a moral hazard, and nobody will play by the rules any more.

I think the solution is a combination of "The Great Settlement"- or who has to take how much of a bite from the shit sandwich, and a G20 commitment to basic banking and business policy (a common international code of conduct) in which people will know what the rules will be moving forward, something based in rationality and not politics...

thanks again,