Users Online Now:
Donate To GLP
Back to Forum
Back to Thread
REPLY TO THREAD
THE ECONOMY & YOU # (Daily Updated Videos & Articles)
Ms Sans Serif
In accordance with industry accepted best practices we ask that users limit their copy / paste of copyrighted material to the relevant portions of the article you wish to discuss and no more than 50% of the source material, provide a link back to the original article and provide your original comments / criticism in your post with the article.
[quote:RoXY:MV8xNTc4NDI2XzMzNDU5NTgwXzExMDE0RkEz] [b]The Bubble Economy and Debt Deflation - Incorporating the Rentier Sectors into a Financial Model[/b] By Dirk Bezemer and Michael Hudson September 16, 2012 michael-hudson.com As published in the World Economic Association’s World Economic Review Vol #1. [i]Now that the Bubble Economy has given way to debt deflation, the world is discovering the shortcoming of models that fail to explain how most credit creation today (1) inflates asset prices without raising commodity prices or wage levels, and (2) creates a reciprocal flow of debt service.[/i] [b]ABSTRACT[/b] Current macroeconomics ignores the roles that rent, debt and the financial sector play in shaping our economy. We discuss the Classical view on rents and policy responses to the rentier sector in the 19th century. The finance, insurance & real estate sector is today’s incarnation of the rentier sector. This paper shows how financial flows can be conceptually and statistically studied separately from (but interacting with) the real sector. We discuss finance’s interaction with government and with the international economy. [b]1. Introduction[/b] Now that the Bubble Economy has given way to debt deflation, the world is discovering the shortcoming of models that fail to explain how most credit creation today (1) inflates asset prices without raising commodity prices or wage levels, and (2) creates a reciprocal flow of debt service. This debt service tends to rise as a proportion of personal and business income, outgrowing the ability of debtors to pay – leading to (3) debt deflation. The only way to prevent this phenomenon from plunging economies into depression and keeping them there is (4) to write down the debts so as to free revenue for spending once again on goods and services. By promoting a misleading view of how the economy works, the above omissions lead to a policy that fails to prevent debt bubbles or deal effectively with the ensuing depression. To avoid a replay of the recent financial crisis – and indeed, to extricate economies from their present debt strait-jacket that subordinates recovery to the overhang of creditor claims (that is, saving the banks from taking a loss on their bad loans and gambles) – it is necessary to explain how credit creation inflates housing and other asset prices, while interest and other financial charges deflate the “real” economy, holding down commodity prices, shrinking markets and employment, and holding down wages in a downward economic spiral. We are dealing with two price trends that go in opposite directions: asset prices and commodity prices. It therefore is necessary to explain how credit expansion pushes asset prices up while simultaneously causing debt deflation. [b] CONTINUE: http://www.globalresearch.ca/the-bubble-economy-and-debt-deflation/[/b] [/quote]
Economic Armageddon and You
Wondering about the American economy? This animated video explains inflation, stagflation, recession and more, all in 5 minutes.
NB: UPDATES AT LAST PAGE
Pictures (click to insert)
Big Round Smilies
Aliens and Space
Friendship & Love
Misc Small Smilies
View All Categories
Next Page >>
Disclaimer / Copyright Info
with questions or comments about this site.
"Godlike Productions" & "GLP" are registered trademarks of Zero Point Ltd. Godlike™
Website Design Copyright © 1999 - 2017 Godlikeproductions.com
Page generated in 0.011s (12 queries)