US consumers climbing back into debt hole, but quality is higher.

[BLCalliente]

Wages will rise with inflation...LOL.

I think a lot of people in this thread don't really understand how the Fed functions, or why fractional reserve banking doesn't work.

Yeah, you know, it's just like Econ101 that half of these people have this semester (and the other half haven't had at all).

[Tinykong]

Uh, fractional reserve banking does work, its working right now, it's not some Austrian school crack-pot theory that has never been tried.

Fractional reserve banking is great for banks, but bad for everyone else. They create money out of thin air, collect interest on it, and over extend the money supply of the entire nation. If it’s working so well, why is nearly every country in the modern world in economic turmoil? The government is paying a private enterprise for the privilege of producing it’s own currency, and allowing them to collect interest on the money twice. Pretty sweet setup, it’s no wonder banks are the most expensive buildings in town, they are flush with imaginary money and collecting real interest on it.

[TheGhostAgent]

Because all humans are irrational and horrible long term planners. So much for the rational agent theory of the markets.

And there goes all economic theories that relies on people making rational decisions... oh wait that's almost all of them... LAWL

Both parties are irrational because they are both humans. Irrational consumers irrationally thinking they can pay it, and irrational loan pushers who think they could sell these loans without repercussion.

That's what I'm saying... but in the end, you can't regulate and legislate against stupid.

Good thing everybody in this country is as smart as you and I.

Oh wait, what's that? They aren't? Shit.


The mortgage companies gave out these predatory loans because there was absolutely no risk to them. They knew they were going to get paid by either completion of the mortgage, bundling the mortgage off and selling it to somebody else, or credit default swaps (thanks AIG!). They pushed as hard as they possibly could because they were making too much money and there was absolutely no downside. Should consumers have been smarter? Yes, except for the ones who aren't smarter. You know, almost all of them. The ones targeted by the predatory lending. If you don't know this, THIS IS WHY WE HAVE GOVERNMENT OVERSIGHT.

Did you completely miss the part where people are not smart due to poor education both from teachers and parents? Or did you just get whipped up in a frenzy when I'm trying to pin responsbilities on people rather than fault 100% onto the big bad banks? In order for the banks to go out and push these mortgages and to net returns, there has to be a demand for it. Where does the demand come from in the end? Oh wait... wait for it... THE CONSUMERS THEMSELVES.

[Daelak]

Fractional reserve banking is great for banks, but bad for everyone else. They create money out of thin air, collect interest on it, and over extend the money supply of the entire nation. If it’s working so well, why is nearly every country in the modern world in economic turmoil? The government is paying a private enterprise for the privilege of producing it’s own currency, and allowing them to collect interest on the money twice. Pretty sweet setup, it’s no wonder banks are the most expensive buildings in town, they are flush with imaginary money and collecting real interest on it.

And what are you going to do about it? Oh that's right nothing. They have the money that buys the power and influence.

[Cracked]

Currently in my country the annual inflation is around 3% and wages are perpetually being reduced across almost all sectors. But since average person is not really financialy literate and doesn't quite grasp the simple concept of inflation, the gov can keep them relatively satisfied. How sad. Then they see prices going up and they think it's because corporations are getting out of hand and insatiable. That is even sadder.

[Tinykong]

And what are you going to do about it? Oh that's right nothing. They have the money that buys the power and influence.

What a wonderful attitude, it’s no wonder they are able to get away with stuff like this. You keep being a doormat, I’ll continue to disagree with the private enterprise known as the Federal Reserve.

[Daelak]

What a wonderful attitude, it’s no wonder they are able to get away with stuff like this. You keep being a doormat, I’ll continue to disagree with the private enterprise known as the Federal Reserve.

And I am sure they are going to care a WHOLE LOT while you still live in their system.

[Tinykong]

And I am sure they are going to care a WHOLE LOT while you still live in their system.

Yeah, because I'm the only person who disagrees with the Fed...

[BLCalliente]

And there goes all economic theories that relies on people making rational decisions... oh wait that's almost all of them... LAWL

That's what I'm saying... but in the end, you can't regulate and legislate against stupid.

Did you completely miss the part where people are not smart due to poor education both from teachers and parents? Or did you just get whipped up in a frenzy when I'm trying to pin responsbilities on people rather than fault 100% onto the big bad banks? In order for the banks to go out and push these mortgages and to net returns, there has to be a demand for it. Where does the demand come from in the end? Oh wait... wait for it... THE CONSUMERS THEMSELVES.

Gee, if everyone's parents had just taught them what financial derivatives and credit default swaps were, we would never have been in this mess!

Silly parents.

As far as the demand scapegoat, there is always a demand for housing. It's the goddamn American dream for people to own their own home. You're going to have to try harder to let the banks off the hook.

---------- Post added 2012-07-12 at 02:41 PM ----------

That's what I'm saying... but in the end, you can't regulate and legislate against stupid.

Yes, you can. That's precisely what the fuck regulation is for, sir. To protect the uneducated from predatory practices. To save people from being victimized. To prevent unethical business practices in the first place. I could go on and on, but you seem smart enough to get it at this point.


EDIT: And for somebody preaching "personal responsibility" towards people who don't have the means or ends to get educated on the subject in the first place, why aren't you directing that same keen eye for blame laying on the banks. It's ok to bail them out even though they are the ones who are the experts on what they are doing, but when it comes to the consumer it's "personal responsibility". Cool story.

[Deleted]

---------- Post added 2012-07-12 at 04:12 PM ----------

Your bullshit Austrian theory continues to be proved wrong by QE1, QE2 and 2% inflation.

Apparantly, you have no idea of Austrian Business Cycle Theory. According to it, injecting money into the system does inflate prices of higher orders of production (i.e. capital goods as machinery, housing construction etc.). It does not say anything about general inflation levels.
Look at price aggregates of certain segments, the expansion of credit and whether the money issued in the economy is just added to the money supply or is invested in money-substitutes in the first place. Only then you can tell whether it is an austrian type of boom or not.
Calling a theory bs does not help at all if you want to be taken serious.

[Laize]

By your standards. You should perhaps ask some of those directly touched by it if they agree...unless you feel that as long as the almighty market is free, it doesn't matter that people suffer? Or am I misreading you?

If someone is in a business that fails in a recession, that business wasn't designed to survive.

Keeping it going JUST to keep people employed is a shitty thing to do.

[Daelak]

If someone is in a business that fails in a recession, that business wasn't designed to survive.

Keeping it going JUST to keep people employed is a shitty thing to do.

Do you mean losing money, reduction in sales, or bankruptcy as a term for "fail"?

[paralleluniverse]

I lol'd.

Yeah, of course wages will increase with inflation.

Of course.

Except that all historical data for the last 50+ years shows they haven't.

And in case you try to bash core inflation: http://krugman.blogs.nytimes.com/2011/04/26/core-notes/

---------- Post added 2012-07-13 at 12:58 AM ----------

Uh, fractional reserve banking does work, its working right now, it's not some Austrian school crack-pot theory that has never been tried.

Not only does fractional reserve banking work, but banking has always been fractional reserve, even when it was on the gold standard.

---------- Post added 2012-07-13 at 01:00 AM ----------

Apparantly, you have no idea of Austrian Business Cycle Theory. According to it, injecting money into the system does inflate prices of higher orders of production (i.e. capital goods as machinery, housing construction etc.). It does not say anything about general inflation levels.
Look at price aggregates of certain segments, the expansion of credit and whether the money issued in the economy is just added to the money supply or is invested in money-substitutes in the first place. Only then you can tell whether it is an austrian type of boom or not.
Calling a theory bs does not help at all if you want to be taken serious.

Except it doesn't. There is no inflation beyond the Fed's 2% target.

According to Austrians, there will be hyperinflation any day now. Any day now, guys!

And with every passing day where there is no hyperinflation, your creditability sinks further into the abyss.

[Laize]

Do you mean losing money, reduction in sales, or bankruptcy as a term for "fail"?

Consistently losing sales and money will inevitably result in bankruptcy.

Not all companies that lose money go out of business.

[TheGhostAgent]

Gee, if everyone's parents had just taught them what financial derivatives and credit default swaps were, we would never have been in this mess!

Silly parents.

As far as the demand scapegoat, there is always a demand for housing. It's the goddamn American dream for people to own their own home. You're going to have to try harder to let the banks off the hook.

---------- Post added 2012-07-12 at 02:41 PM ----------



Yes, you can. That's precisely what the fuck regulation is for, sir. To protect the uneducated from predatory practices. To save people from being victimized. To prevent unethical business practices in the first place. I could go on and on, but you seem smart enough to get it at this point.


EDIT: And for somebody preaching "personal responsibility" towards people who don't have the means or ends to get educated on the subject in the first place, why aren't you directing that same keen eye for blame laying on the banks. It's ok to bail them out even though they are the ones who are the experts on what they are doing, but when it comes to the consumer it's "personal responsibility". Cool story.

... you don't need to understand CDS or CBO etc. to understand to not spend beyond your means... Your strawman attack fails spectacularly.

And regulations cannot fully stop human greed and stupidity. Layering on more shit does not prevent shit from happening, sorry to say. Even with all of today's supposed compliance and regulations, if people want to really fuck their clients over, they still can. No amount of regulation will ever stop greedy and selfish people from doing what they want to do. Your logic of "Oh if only we had more regulations, these things wouldn't happen", is like saying if only we had more years of jail or death penalties, crimes would stop! Oh wait... it doesn't serve much of a deterrent at all.

And not once in my post did I absolve the bankers of their wrong doing, so another spectacular strawman fail. They're just as guilty as the consumers, but to pin the whole blame on the bankers and portray the consumers only as victims is plain ignorance.

[Eroginous]

http://www.federalreserve.gov/releases/g19/Current/

While credit card debt (the most dangerous kind) remains 13% below its all time high back in 2007, personal and auto installment loans have climbed by more than credit cards have fallen.

This means American consumers are spending again. Should bode well for the economy in the coming years.

Yeah, well the economy only exists as long as people are spending money, and in order to have money to spend, they have to borrow at some point. It's one of the most ridiculous notions that this country faces: You can never be free of debt and still have a place to live, food in your belly, and nice stuff. The first settlers who lived here didn't pay rent and didn't have much in the way of bills. It was trade for food and clothes, whether you were producing them or trading for them.

[boomkinhero]

Everyone knows the "recession" was made up and was an excuse for businesses to trim the fat. America is run by corporations.