The Economy is Cracking under Too Much Debt

Wolf Richter on Chris Martenson’s PeakProsperity:

It’s been years since we’ve heard about production cuts by automakers, but here they come. “We continue to match production with demand,” Ford says. Read…  It Starts: Shutdowns, Production Cuts, Layoffs at Auto Plants

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  19 comments for “The Economy is Cracking under Too Much Debt

  1. Tom Kauser says:

    Deflation cyclotron

  2. Tom Kauser says:

    Its like being at an outdoor show!
    We try to touch the floating beach ball for 14 hours until the main act hits that first note and so long beach ball.
    U let the Fed own common stock and bye bye stock market?
    They came for the financials…… The rest is historyl

  3. Tom Kauser says:

    The last two times the bubbles burst it was like ha-ha for months on end and then the Fed dumped millions of shares out of AIG and suddenly nobody remembers your name!
    AIG financed (indirectly) Henry Paulson/banks/Fed and now the shadow banking system is so long goodbye ado ado and u and u and u…….10 trillion and two movies with sequels!

  4. Tom Kauser says:

    10 trillion is a piece of cake with shiatty paper everywhere

    • humpty Dumpty says:

      You might want to ease off the caffeine for a few days and get your metaphors sorted out…

      • hidflect says:

        I was enjoying the sense of outrage on Tom’s rant. We should all be posting like this. A little incoherence conveys a lot…

  5. Ptb says:

    Paying off debt is pretty much a fantasy these days. It’s all about servicing debt. Making the monthly payments.
    2% mortgages? Even a no interest loan has an amortization table that requires a minimum payment. Credit cards have a minimum payment that can go to infinity. But a maximum debt ceiling. So the end is near, but there’s probably another level left in it.

  6. NotSoSure says:

    What’s a couple of trillions among friends?

  7. Old Codger says:

    The WORLD economy is cracking…..


  8. Raymond Rogers says:

    Im not saying this to be an ass, but I don’t get the logic of saying we have precipitous bubbles, and then say Germany cannot let Duetche Bank fall. This of course infuses more money into undeserved hands and money creation into already saturated economies. All of credit, by the way, ends up going into a hole. It should be noted that every time you create a unit of currency, you devalue someone else’s unit of currency. It is legalized theft, all of which hurts the consumer.

    If it is necessary to create credit in order to avoid a deflationary downward spiral (not all deflation is a bad thing, I do want to differentiate this point), there is an option to do so through financially healthy institutions. The infusion should be made through those vehicles as opposed to being dumped into a hole. This infusion should not be simply given to these institutions, and the money should be recaptured and applied to the debt.

    There needs to be more creative thinking with dealing with these problems. We have to ask ourselves who needs to spend and who needs to save. Usually the rich save and those in the middle overextend themselves. This needs to reverse. The tax code needs to be rewritten to formulate tax breaks to propel the wealthy to provide more consumption and tax breaks for those in the middle to save. In this way the economy is fuelled more by currency than by credit. I reject outright confiscation, as property is a right.

    The same concept needs to be applied towards job creation. Write-offs need to be reformulated to encourage more employment. I’ll leave this to the math gurus to figure out what the differences should be between equipment write-off vs human labor write-offs.

    But all of this speaks to what has created such a massive problem, and that is the size of government. Big government facilitates massive corruption, and wealth transfers. The top and bottom are served from the proceeds from the middle.

    Japan is doing what every other country is doing, sacraficing the well being of future generations in order to maintain standards of living the people now don’t deserve. Personal responsibility does not exist anymore.

    • economicminor says:

      Ray, The US has enough energy, food, clothing, entertainment and housing to take care of all of us. We are over producers. We were so good at over producing we are wealthy in infrastructure and machines and toys. The problem is our attitude. All these concepts of money are about power. Those in power have got the majority in debt to them. As such everyone ends up working for those who are part of the 1%; i.e. the inequity and the anger and the unrest.

      Deflation would be very bad for the 1%. Deflation will in reality be a huge loss of power to those who currently wield power. The biggest problem for society is not the changing of power but the complexity of our present system. It is so complex that outcome from the unraveling of debts can not be determined.

      This is so frightening to everyone who understands it that it is better to be glad that our system hasn’t yet cycled. But as most of us know, it is only a matter of time before it does. What can not continue eventually doesn’t!

      When the dam breaks, there is going to be a great flood!

      As for jobs, we don’t really need jobs because the country already knows how to make to much with to few. Making more isn’t the answer either. We need a new attitude.

      Personal responsibility for what? To over produce or to be overly in debt to have things we don’t have time to enjoy?

      There is no logic nor an end plan on the road we are currently on. Yet the majority seem to be eager to get there. At this rate we will surely self-extinct!

    • Tom Kauser says:

      You steal nothing from the future!
      All the money in the system is virtual and only exists to charge main street for the use? (Perpetual usury)
      Your children’s future economy is also virtual and has no bearings to any discussion except to urge you to give up and worry about making you better for them?
      If not for media, it would have been a million years before anyone would have had to worry about a trillion anything?
      Eliminate the fed and everyone could ride the glass elevator like the boy from the wonka book!

    • hidflect says:

      “There needs to be more creative thinking with dealing with these problems.”

      This is precisely the issue with economists. They are professionally discouraged from any such activity. They think like incrementalists and everything they do trends to considering how to induce a 5% change. I think that’s how DB has spiralled nearly out of existence despite probably having hundreds, if not thousands of expert analysts from top universities.

  9. Petunia says:

    The Miami Herald has a big story on the Florida economy and it is mostly stagnant to down. It includes a good county by county graphic. I checked the home prices and rents in my old neighborhoods and the bad income numbers are not reflected in the real estate markets. I can’t see it going on much longer. I’m glad I left when I did.

  10. hidflect says:

    I laughed out loud when Wolf said, “Good grief!” in the podcast. Careful Wolf. You’ll bump your milk and cookies. I’m teasing him. Such a nice guy, really.

    (Yes, that is my takeaway from the presentation. Did I miss something…?)

  11. Kasadour says:

    I enjoyed this but I disagreed on one point: if my house were worth 1.8 mill and I were right side up on it by a couple three or four hundred K, I’d cash out in a New York minute. No question. As a matter of fact that is exactly what I plan to do with my home in Oregon next year if all goes as planned. I don’t want it and I don’t need it.

    I don’t plan to use the money to buy another property in my area. I’ll sit on it (cash) and rent for awhile.

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