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take a dollar out of the flow and tuck it away as assets and it is no longer in the current it no longer flows graph 1 household financial assets per dollar of currency like things by the third paragraph you re building a story on a definition that you hope is safe add up the value of all financial assets and that s the money stock nonsense in the paragraph just before your graph you seem to confuse two definitions of the word real here s the offending sentence we see this clearly when we look at recessions and the year over year change in real inflation adjusted household assets a measure of households total claims on real assets the one meaning of real is inflation adjusted as you point out the other meaning is not monetary real assets are things like the drill press you sometimes write about financial assets do not become in that sense real when you drain the inflation out of them i took a look at the total household assets from your first graph in comparison to total household financial assets graph 2 total blue and financial red household assets looks like financial assets are the larger part of the total real assets homes factories drill presses the smaller part then too there s some confusion just after your first graph you write when people have less money they spend less and gdp declines or grows more slowly that is hardly a counterintuitive conclusion but before that you said if they want to spend more there will be more currency like stuff around the fed will ensure it you say it s obvious hardly counterintuitive that when we have less money we spend less but you also say that if we want to spend more the money will grow to accommodate us your statements are contradictory further if all financial assets are money as you say then to calculate the velocity of money one would divide gdp by total financial assets not by total assets as you show in your second graph not that i buy the premise at the end you pull the inequality rabbit out of the hat some readers will like your post because you give them the ending they want no matter it s non sequitur and your last words at the very least the goal should be to reverse the rampant radical upward distribution of the last thirty years okay so look at policy changes since the late 1970s and reverse them but don t blather me with nonsense and error posted by the arthurian at 4 00 am 0 comments thursday may 22 2014 gillibrand is one of 29 co sponsors of the measure that could save graduates thousands of dollars on their repayments from timesunion com with student loan debt surging u s sen kirsten gillibrand on tuesday pushed for legislation that would allow graduates to refinance their loans at lower rates people are spending all their money to pay back debt instead of investing in the economy she told reporters during a conference call it s a huge drag on the economy in one example refinancing could save 70 to 100 a month it s not nothing but it only eases things it doesn t turn the trend around we need to accumulate less debt you know what s gonna happen you save 70 a month on student loans now and you re feeling pretty good and pretty soon you go out and put that new tv on the credit card policy has to change the fed has to keep an eye on the ratio of private debt to circulating money and congress has to create policies that encourage repayment rather than accumulation of debt once this is done we can eliminate a lot of the policies established since the 1980s that were designed to moderate inflation by keeping wages down and rising wages will mean we have money enough that it doesn t kill us to pay down our debt a little faster something we want to do anyway posted by the arthurian at 4 00 am 0 comments wednesday may 21 2014 when it s too late it ll be too late from mni news monday april 14 2014 14 48 us cbo report highlights coming surge in debt service payments by john shaw congressional budget office growing debt rising rates will ignite interest payments cbo annual debt service costs to approach 700 billion by fy2021 cbo debt service costs will exceed 5 8 trillion over fy2015 fy2024 period washington mni while the congressional budget office s most recent update of its economic and budget baseline does not offer any startling new insights into u s fiscal policy it paints into even bolder relief one profound fact the enormous impact that growing debt service costs will have on u s fiscal policy in the next decade and beyond the article continues on and it turns out it s all about the federal debt at least i m pretty sure they talk about our debt but in the same paragraph they compare it to the defense budget and other domestic agencies and it s a cbo report they ve gotta be talking about the federal debt but the private sector owes more debt than the federal government and pays higher interest rates so if rising rates are a problem for the government rising rates are a bigger problem for the private sector the article also says this the cbo says that as the economy strengthens interest rates will rise considerably know what that s a good reason to go with the arthurian plan to accelerate the repayment of private sector debt keep interest rates low and use tax incentives instead to nudge a little more money into debt repayment policy has to change posted by the arthurian at 4 00 am 0 comments tuesday may 20 2014 there s nothing wrong with the common trope at the slack wire the nonexistent rise in household consumption there s a common trope in left and heterodox circles that macroeconomic developments in recent decades have been shaped by financialization in particular it s often argued that the development of new financial markets and instruments for consumer credit has allowed households to choose higher levels of consumption relative to income than they otherwise would this is not true rising debt over the past 30 years is entirely a matter of disinflation and higher interest rates there has been no long run increase in borrowing when mason says this is not true he is referring to the belief that households chose higher levels of consumption relative to income for the past 30 years he is not referring to the common trope that financialization increased obviously financialization increased update 4 25 am posted by the arthurian at 4 00 am 0 comments monday may 19 2014 the repayment of household debt when there is a dollar of debt for every dollar of income paying down 10 of the debt takes 10 of the income when there is 10 of debt for every dollar of income paying down 10 of the debt takes all of the income i ve seen graphs of debt repayment as a percent of disposable income never saw anything on the amount of debt repaid as a percent of debt outstanding we can look at debt service to see how much debt we pay off each year and then compare debt paid off to debt outstanding to see the relation between these two at fred a search for debt service turned up lots of hits one of the first was household debt service payments out of disposable personal income i know there are measures of household debt so household debt service payments might make a good comparison i looked a little more and found three measures of debt service as a percent of disposable personal income graph 1 three measures of debt service out of disposable personal income at first glance the blue line looks a lot higher than the others but the vertical axis doesn t go all the way down to zero so the red and green are higher than they look i wonder if i add the red and green together do they equal the blue graph 2 consumer mortgage debt service payments as of dpi red dashed overlaid on household debt service payments as a percent of dpi blue looks like it from here that could be useful information so anyway i ll use the total the household debt service number i should be able to get household debt service in dollars or billions by undoing the percent of dpi calculation if i was figuring debt service as a percent of disposable personal income i d divide debt service by disposable personal income dpi and multiply by 100 to undo the calculation and get the debt service number back i d divide by 100 and multiply by dpi now i know how to get household debt service from fred s household debt service ratio divide by 100 and multiply by dpi graph 3 household debt service payments in billions for dpi i used fred s dspi crap it only goes back to 1980 oh well now we can look at household debt service payments the number from graph 3 as a percent of household debt graph 4 household debt service payments as a percent of household debt for household debt i used fred s cmdebt wellsir it seems we re paying down debt even slower now than before the crisis that can t be good notice the flat spot there in the latter 1990s when the economy was doing good i wonder what this ratio looked like before 1980 posted by the arthurian at 4 00 am 6 comments sunday may 18 2014 simple debt is a stock that accumulates year upon year income is a flow that starts again at zero every year therefore unless we choose to prevent it debt will grow till it dwarfs income posted by the arthurian at 4 00 am 0 comments saturday may 17 2014 nuanced monetarism in the general theory maynard keynes said we can draw the line between money and debts at whatever point is most convenient for handling a particular problem in capitalism and freedom milton friedman wanted to carefully manage the quantity of money but he didn t care what money was managed what monetary aggregate it didn t concern him at all according to keynes where you put the dividing line between money and debt depends on the problem you re trying to solve according to friedman it doesn t matter where you put the dividing line posted by the arthurian at 4 00 am 1 comments friday may 16 2014 something must have caused it yesterday s post was too brief to be so thumbs downish i didn t feel good about that and i want to take a longer look at marcus nunes s post today marcus opens with an excerpt from mian and sufi that lays out their picture of why the housing bubble tanked the economy and the tech bubble didn t the sharp decline in home prices starting in 2007 concentrated losses on people with the least capacity to bear them disproportionately affecting poor homeowners who then stopped spending what about the tech crash in 2001 stocks were held almost exclusively by the rich the tech crash concentrated losses on the rich but the rich had almost no debt and didn t need to cut back their spending an interesting picture from my perspective marcus then quotes david beckworth who disputes mian and sufi s view beckworth admits it is true there was far more u s household debt leading up to the great recession than the 2001 recession but he considers debt a symptom not a cause in my view beckworth says the underlying cause was interest rate targeting central banks running up against the zlb the failure by central banks to get around the zlb caused most of the household deleveraging not the other way around monetary policy in other words was too tight during the crisis monetary policy was too tight beckworth says relative to what i don t read much beckworth so i don t know but i imagine he d say money was too tight relative to the needs of the economy to this straw beckworth i must reply that s not specific enough if money is tight then obviously it is tight relative to the needs of the economy but interest rates are at the zero bound that s as loose as money can get so the problem cannot be that interest rates are too high in the same david beckworth post that marcus nunes quoted beckworth says the real problem is the zlb debt itself is not the problem this is because for every debtor there is a creditor who could provide offsetting spending if the interest rates adjusted down to their natural rate level this adjustment process is impeded when the natural interest rate is negative since nominal interest rates cannot go below zero percent now steve roth responds to the for every debtor there is creditor part of that i think it s the best banks are not intermediaries argument i ve ever seen but i m going to skip right over it because i have a different concern beckworth says debt only became a problem because the natural interest rate is negative okay but why is the natural rate of interest negative sunspots c mon david something must have caused it interest rates are as low as they can go we can t fix the problem by lowering rates more so it s obvious to me that the problem is not that interest rates are too high the problem is not that money is too tight there must be some other problem that is related to money and interest rates that problem is debt excessive private sector debt look lowering interest rates did fix the problem before we got to the zlb it worked by making credit less expensive other people may offer complicated explanations but if you lower interest rates you make credit less expensive but now we ve reached the lower limit and credit is still too expensive that s beckworth s argument i think so suppose it s true how can we make credit less expensive when interest rates are low as they can go let me ask the question another way how can we make total debt less expensive without lowering interest rates only one way reduce the size of total debt the trouble is we need some interesting new economic policy to make it happen because as things stand now the only way available to us to reduce the size of total debt is to pay debt down and paying debt down takes money out of circulation and then you get the situation where interest rates are at the zero bound and money still seems too tight 17 may 2014 edit changed other people may have complicated explanations to other people may offer complicated explanations posted by the arthurian at 4 00 am 0 comments thursday may 15 2014 marcus comes up empty marcus nunes the fact is that in after 2007 the poor man was doubly penalized on the one hand his nominal income took a plunge and insult was added to injury when his job was taken away the chart compares nominal income growth ngdp during the two cycles is it hard to see why consumer spending and all the other components of gdp and employment crashed the chart shows a big drop in nominal gdp during the great recession looking at that big drop marcus says it is easy to see why consumer spending and all the other components of gdp crashed marcus says in other words that the reason all the components of gdp crashed is that gdp crashed sir that explains nothing posted by the arthurian at 4 00 am 11 comments wednesday may 14 2014 one interesting thought posted by the arthurian at 4 00 am 0 comments tuesday may 13 2014 gavin kennedy a metaphor is a metaphor gk at adam smith s lost legacy in treating a metaphor as a real entity which they believe actually operates in society you end up with fantasies when these fantasies are believed by economists including nobel prize winners you leave reality...
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