0 Members and 1 Guest are viewing this topic.
How in the name of holy f*** does a depression clear out debt?
QuoteHow in the name of holy f*** does a depression clear out debt?It's very simple. I'll give a couple of examples. A consumer drowning in debt can no longer afford the mortgage. Result he goes bankrupt and is no longer in debt and can start to rebuild his life. Next time around the cost of the next house he buys will be a lot cheaper and so more affordable in the future.An inefficient business finds the cost of borrowing means he can no longer survive. He goes bankrupt clearing his debt. The more efficient productive companies in the economy take up the slack from the company that has gone bust improving our nation's productivity.
RD.I'm sure energy costs must be a part of the problem, but they cannot be the entire reason. Because there were two far more severe energy price shocks in the 1970s, but the productivity curve hardly blipped.
f***ing hell Mick! The penny has finally dropped for me! You are actually being serious here aren't you? This really and truly IS what you believe! It all makes sense now. I am really, really sorry that I've been abusive. The problem all along wasn't a deliberate obtusiveness. It was just that you haven't got the first f***ing idea how the world actually operates!OK. Let's indulge you. These individuals and companies who throw their hands up and go bankrupt.Magic! Their debt is wiped out.What about the people that they owed that debt to? What happens to them? Say it is a bank that lent them money? What happens to the bank when it turns out that a lot of the debtors that they lent money to are unable to pay back their debt?What happens to that bank then? Well, it may well go bust itself, because the bank actually borrowed money from someone else in the first place. Like individual savers. Or companies investing their profits in bonds. Or other banks, off-loading temporary excess funds.So...if that bank goes bust. What happens to the creditors of that bank?Etc....etc...etc...etc...Got it?
I suppose there are lots of variables but it seems to me crude hasn't shifted for the last two or three years from a new high level at somewhere just above $100 pb. In the 70s we saw a similar period just above $80. We'll need a few more years of data to see if this remains a new reality or if it starts to fall back.Here is another interesting chart showing the price of petrol at the pump, adjusted for inflation.We have never had to pay so much for fuel since the 1920s and nobody ran a car or fleet of lorries back then.Edit: BST the chart you link to is for Illinois crude. Brent crude is a little higher more like $100 rather than $90 and I believe is now seen as the more significant figure for reasons I can't remember.
Is there no end to the good news? The UK economy is growing faster than forecast.http://www.bbc.co.uk/news/business-25461227
Er yes, did you read the 2nd part of that story? The one sub headed 'gloomy reading'?