Comments on: If Bridgewater is Right, the Whole Financial Sector Will be Guttered http://www.dailyreckoning.com.au/bridgewater-financial-sector-2/2008/07/09/ An independent perspective on the Australian and global investment markets Sat, 21 Nov 2009 17:27:32 -0600 http://wordpress.org/?v=2.8 hourly 1 By: jack carter http://www.dailyreckoning.com.au/bridgewater-financial-sector-2/2008/07/09/comment-page-1/#comment-44026 jack carter Thu, 02 Oct 2008 18:02:58 +0000 http://www.dailyreckoning.com.au/?p=2937#comment-44026 No doubt the bail out is necessary, but will it be sufficient? Almost certainly not. The consumer is in terrible shape and the proposed financial fix does not touch the hell of consumer finance which involves the rest of the financial market now considered "safe". Will, not really because supply of credit and demand for credit are two very interdependent variables in the determination of the level of economic activity. It is also certainly clear that the load has shifted to the point it is going to topple - no matter what. To Get Ahead of the tragedy we need to focus on the way out of a depression. As an economist, I think we did not discuss that in my Ph.D. program and a search of the literature shows someone can still get a Nobel by taking the problem on. The way back the last time was a war with massive debt based spending. I might know more than I thought I did. No doubt the bail out is necessary, but will it be sufficient? Almost certainly not. The consumer is in terrible shape and the proposed financial fix does not touch the hell of consumer finance which involves the rest of the financial market now considered "safe". Will, not really because supply of credit and demand for credit are two very interdependent variables in the determination of the level of economic activity. It is also certainly clear that the load has shifted to the point it is going to topple - no matter what. To Get Ahead of the tragedy we need to focus on the way out of a depression. As an economist, I think we did not discuss that in my Ph.D. program and a search of the literature shows someone can still get a Nobel by taking the problem on. The way back the last time was a war with massive debt based spending. I might know more than I thought I did.

]]> By: Smack MacDougal http://www.dailyreckoning.com.au/bridgewater-financial-sector-2/2008/07/09/comment-page-1/#comment-29964 Smack MacDougal Thu, 10 Jul 2008 15:36:09 +0000 http://www.dailyreckoning.com.au/?p=2937#comment-29964 Bill writes, "When the lenders don't have capital, they can't lend it out. Typically, they lend $10 for every dollar of capital. So if a dollar of capital is wiped off their balance sheets, as much as $10 of credit is erased from the economy." Lenders lend cash (rent cash to cash rentees). Investors BUY capital (the right to claim future income). Investors buy capital from banks. When banks lend cash in the form of loans, banks buy capital from cash rentees. A bank that has cash or cash equivalent instrument can deposit such with the Federal Reserve as a "bank reserve". Once done, the bank can lend up to 10 times the amount in New Cash, which we name "debt" or "credit", depending upon one's perspective. What counts is the ratio of Credit Default to New Cash in Circulation. When this rises, banks ought to reduce their lending as this becomes a sign that transaction relationships within the economy are breaking down. Bill writes, "When the lenders don't have capital, they can't lend it out. Typically, they lend $10 for every dollar of capital. So if a dollar of capital is wiped off their balance sheets, as much as $10 of credit is erased from the economy."

Lenders lend cash (rent cash to cash rentees). Investors BUY capital (the right to claim future income). Investors buy capital from banks. When banks lend cash in the form of loans, banks buy capital from cash rentees.

A bank that has cash or cash equivalent instrument can deposit such with the Federal Reserve as a "bank reserve". Once done, the bank can lend up to 10 times the amount in New Cash, which we name "debt" or "credit", depending upon one's perspective.

What counts is the ratio of Credit Default to New Cash in Circulation. When this rises, banks ought to reduce their lending as this becomes a sign that transaction relationships within the economy are breaking down.

]]> By: Curt http://www.dailyreckoning.com.au/bridgewater-financial-sector-2/2008/07/09/comment-page-1/#comment-29824 Curt Wed, 09 Jul 2008 19:00:56 +0000 http://www.dailyreckoning.com.au/?p=2937#comment-29824 GM is a large part of the foundation of the economy. If GM is bankrupt, then so is America. The financial sector has already been guttered. - Got Gold? GM is a large part of the foundation of the economy. If GM is bankrupt, then so is America. The financial sector has already been guttered.
- Got Gold?

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