Libertarian666 wrote:
Maybe I'm just dense, but I don't see how that is the Achilles' heel of the PP. It seems much more like the Achilles' heel of any paper-based investment scheme. If any asset is resistant to such an event, it would be physical gold, which aside from its lack of counterparty risk, accounts for approximately 0% of most investors' assets, and is therefore less vulnerable to mass selling than other, more widely held, assets such as stocks and bonds.
Maybe, but have you seen 1980? Gold was in a huge bubble right up until its Minksy Moment. Which is about $2400 in current inflation-adjusted terms. We're not that far off from it. Form doesn't matter as much as liquidity juice and in our fiat economy, private credit creation is virtually unlimited. It all has to go somewhere and as real rates are negative, that is commodities until the economy ever recovers (the market certainly thinks that is happening at present).
The PP is especially sensitive to a Minksy Moment which drags down all asset classes but cash. But in fairness, so is everything else! But for a so-called fortress portfolio, this is its Achille's heel.
Last edited by MachineGhost on Mon Mar 11, 2013 9:19 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
moda0306 wrote:
Nobody is saying debt doesn't matter. It's simply that it has to be looked at in context of what it really is. Monetary Realism is mainly a description of our monetary system. It's just that many people that see these mechanics for what they are agree that QE is pretty useless in a balance sheet recession because it doesn't improve balance sheets.
Au contraire! QE is improving the mortgagee's balance sheets, just not the mortgagor's. A similar situation occured in the early 1990's after Black Monday and the S&L crisis. It took about four years to repair the bank's balance sheets until the stock market finally bottomed in April 1994 with Netscape's IPO later that year kicking off the tech bubble. There was also the RTC, the Gulf War, the Pound/EMU implosion and the Bond Market Apocalypse of 1994. The difference between now and all those spooky events is the mortgagor wasn't hobbled in the knees.
Basically, we have stupider idiots in Congress now than back before Clinton won the Presidency.
Last edited by MachineGhost on Mon Mar 11, 2013 9:34 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
moda0306 wrote:
Yes, peoples' behavior can be irratic in groups. However, it's peoples' irratic behavior in large groups that macroeconomics seeks to understand, and micro-pundits just extrapolate micro behaviors to that of the whole. Do they get it right all the time? Hell no. But the government, especially at the federal level, has to operate strategically knowing what they say or do is working mostly in a closed system. For instance, if I know someone in a city that's going to get wiped out by a hurricane, but nobody else knows, the best way for me to solve my problem is to call that person and tell them to get out of the city as fast as they can. When government warns citizens of a hurricane, though, they have to work within a system that will behave much differently than one guy driving 90 mph to get out of the city.
For the any government to make public policy decisions based on open-system behavioral predictions is just plain stupid. Can closed-system behaviors be difficult to predict with 100% accuracy? Definitely. But it's no excuse to just be dumb about it for the sake of being dumb. During recessions, taxes should be cut, spending (at least on stuff government was going to do anyway (build roads, bridges, rail, buildings, park improvements, etc)) should increase, and interest rates on loans to businesses and individuals should naturally drop even if just a natural result of the supply/demand effects on a loanable funds model.
