At the request of a few.....Playing by rules that no longer exist except in the

[galileoreloaded]

minds of institutionalized consumers, is more than foolish. It is an expression of ignorance worthy of Darwinian award.

(From a thread on debt, and why you are screwing your neighbor by throwing in the towel)

What you think you know, you really don't know.

The banks were allowed to recapitalize by paying them previous assessed full value via a multitude of fraudulently concocted FED programs. It was the largest heist in history, and you people that are complaining at your "equity value decreasing" because folks are dropping out of the debt matrix due to design or default, are a bankers wet dream. You will continue to pay and pay, as long as you are able, based on your 1950's principles, while the banks (who know that there are 4-5 million extra residences nationally) shifted the paradigm about 4 years ago and are playing by the 2006 rule book.

Let me show you one more time why none of your actions matter:



There can be no recovery, no growth, in real terms, as every dollar, public and private, is being extracted due to deleveraging, and dollar destruction.

Watch for a major GDP revision.

[leveymg]

1. Money multiplier definition = velocity of money or leverage of public debt.

to the economy from inflating the monetary base. The Fed has lost its ability to speed up the velocity of funds through the economy by lowering rates and creating liquidity - printing more money (creating more public debt) is now counterproductive from a monetary policy perspective when that ratio is less than one. Increasing liquidity is now counterproductive, there is insufficient demand for funds regardless of a negative real interest rate. The economy has "stalled" like an airplane wing in an ice storm. Or, at least that's how I understand it. Is this explanation correct?

[galileoreloaded]

5. I would butcher the explanation, so instead I poached this. Much more logical than I could do...

"The formula, very roughly speaking, for a Fiat Currency, Fractional Reserve Monetary System is:

Ms=Mor^(N)

Ms = Money Supply
Mor = Prior Money Supply (This is NOT M0, M ZERO)
N (Vm) = Velocity of money.

Here the FOMC does us the favor of N always being the sum of (1+).

This equation cannot be changed. It is the foundation of a monetary system. FOMC policy has, up until 2008, been to take actions that modify (N). Now they are modifying Mo and Ms, as BB has lost control of (N).

N>=1, money supply grows or stagnates, velocity increases or maintains money supply.
N<1, money supply shrinks.

*******
Mult = M1 / H (Ms)

M1 = currency in circulation + checking deposits + other deposits that work like checking deposits
H (Ms) = monetary base.
*******

The Fed is stuffing the money supply, causing the Multiplier and the value of N to plummet. This is the inescapable mathematical consequence of pumping up Mo. N (Vm or Mult) must drop to compensate."

You are correct. The actions to date must also be paid for before we get to new growth, jobs making growth. That intervention has to be purged from the system.

We are finding a new static level of commerce in this country, and we are finding out that we have too many homes to live in, and too many employees for the available jobs. This probably will not change for us for a long, long time.

[Ignis]

2. Thanks for posting this as an OP.

Those wearing rose-colored glasses on the economic "recovery" should take a long, hard look at that graph.

[WCGreen]

3. So for us lay people...

Each dollar that is injected into the system whether by the fed creating that dollar or when we spend a dollar we earn, that dollar goes out and creates more money.

When I spend a dollar to buy something that means the storekeeper has that dollar and he the spends that money. What he has left to spend is maybe .90 cents and so at the first level, that original dollar has created an extra .90 cents and that goes on until the final transaction has no value. The multiplier is how many times that dollar circulates through the system and creates a financial transaction along the way.

But now, the dollars that the Fed are releasing into the economy are going to pay debt which stops the multiplier effect dead in it's tracks.

So when there is more debt in the system that it can handle that means there the multiplier effect is negated.

Am I right?

[galileoreloaded]

6. Sort of, yes. Money in the system ends up paying debt, not rippling through. n/t

[earth mom]

4. The U.S. has officially gone over the edge of the cliff. nt

[galileoreloaded]

7. Not really. We are just adjusting to a new reality.

All fiat monetary regimes collapse, it is inescapable. My original comment was related to folks blaming others for their troubles, when they haven't really SEEN troubles yet.

There is a $1T shortfall in public pensions. (next 20 years) What effect will stuffing cash into those systems have??

Government and her citizens have been asleep at the switch. We are just starting to arise from our slumber, to asses the damage.

[annabanana]

8. It's a damn pity that the branch of the media that specializes

in financial matters doesn't work for us. They are employed for the express purpose of pulling the wool over our eyes.

[HCE SuiGeneris]

9. The whole "for shame" meme is nothing more

than a construct that benefits the banksters. They have no qualms in walking away from ventures that no longer are viable, or in camouflaging their debt and repackaging it as some valuable asset.

Fuck the guilt trip. As noted by the OP, there is a deep cleansing that needs to occur before things may rebound.

[Hello_Kitty]

10. K and R. eom

[leftstreet]

11. K&R

Thanks for doing this!

[ipaint]

12. Shame, Fear and the Social Management of the Housing Crisis

Excellent and informative paper on the role of shame, guilt and fear and it's use by government and the financial industry, credit reporting agencies, etc. to manipulate borrowers onto bearing the brunt of the cost of the housing collapse.


Arizona Legal Studies
Discussion Paper No. 09-35
Underwater and Not Walking Away: Shame, Fear and the Social Management of the
Housing Crisis
Brent T. White
The University of Arizona James E. Rogers College of Law
December 2009


snip

But lenders, of course, do not operate according norms of personal responsibility, and seek instead to maximize profit (or minimize losses). Indeed, to the extent that the lender is a corporation, the directors and executives of the corporation have a legal duty to shareholders to maximize profit and/or minimize losses. Appealing to this duty, it has been suggested that, given the great cost to lenders of foreclosure, they have an economic incentive to modify loans for homeowners in danger of default. This argument has flown in the face of the reality, however, that lenders have been reluctant to modify loans, even for borrowers in the pre-foreclosure process.

Recent studies seeking to explain this apparently irrational behavior have shown that lenders are simply operating to maximize profit and minimize losses, just as they would be expected to do. First, lenders know that borrowers with high credit scores are unlikely to default even at high levels of negative equity. To modify loans for these homeowners would be to throw money away – and to encourage more homeowners to ask modifications. Second, a significant number of homeowners who temporarily default on their mortgages “self-cure” without any help from their lender – though self cure rates have dropped precipitously in the last two years. Again, to modify the loans of individuals who would otherwise self cure would be to throw away money. Third, homeowners with poor credit, or who end up in arrears because of “triggering events” such as unemployment, divorce, or other financially devastating circumstances are likely to default on the modified loan as well. To modify loans for these individuals is to waste time and risk housing prices falling further before the lender eventually has to foreclosure and sell the property anyway.

Given these economic incentives for the lender, a seriously underwater homeowner with good credit and solid mortgage payment history who responsibly calls his lender to work out a loan modification is likely to be told by his lender that it will not discuss a loan modification until the homeowner is 30 days or more delinquent on his mortgage payment. The lender is making a bet (and a good one) that the homeowner values his credit score too much to miss a payment and will just give up the idea of a loan modification. However, if the homeowner does what the lender suggests, misses a payment, and calls back to discuss a loan modification in 30 days, the homeowner is likely to be told to call back when he is 90 days delinquent.In the meantime, the lender will send the borrower a series of strongly worded notices reminding him of his moral obligation to pay and threatening legal action, including foreclosure and a deficiency judgment, if the homeowner does not bring his mortgage payments current. The lender is again making a bet (and again a good one) that the homeowner will be shamed or frightened into paying their mortgage. If the homeowner calls the lender’s bluff and calls back when he is 90 days delinquent, there is a good possibility that he will be told that his credit score is now so low that he does not qualify for a loan modification. The homeowner must then decide whether to bring the loan current or face foreclosure. If the homeowner somehow makes clear to the lender that he has chosen foreclosure, the lender may finally be willing to negotiate a loan modification, a short-sale or a deed-in-lieu of foreclosure – all of which still leave the homeowner’s credit in tatters (at least temporary).

Most lenders will, in other words, take full advantage of the asymmetry of norms between lender and homeowner and will use the threat of damaging the borrower’s credit score to bring the homeowner into compliance. Additionally, many lenders will only bargain when the threat of damaging the homeowner’s credit has lost its force and it becomes clear to the lender that foreclosure is imminent absent some accommodation. On a fundamental level, the asymmetry of moral norms for borrowers and market norms for lenders gives lenders an unfair advantage in negotiations related to the enforcement of contractual rights and obligations, including the borrower’s right to exercise the put option. This imbalance is exaggerated by the credit reporting system, which gives lenders the power to threaten borrowers’ human worth and social status by damaging their credit scores – scores that serve as much as grades for moral character as they do for creditworthiness.

The result is a predictable imbalance in which individual homeowners have born a huge and disproportionate burden of the housing collapse.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467

Much more at the link.

[Bluebear]

13. kick