Sunday, September 26, 2010

Default, It's Coming: One Way Or Another

I think it’s fair to say that a majority of economists believe that excessive private debt played a key role in getting us into this economic mess, and is playing a key role in preventing us from getting out. So, how does it end?
A naive view says that what we need is a return to virtue: everyone needs to save more, pay down debt, and restore healthy balance sheets.
The problem with this view is the fallacy of composition: when everyone tries to pay down debt at the same time, the result is a depressed economy and falling inflation, which cause the ratio of debt to income to rise if anything. That is, we’re living in a world in which the twin paradoxes of thrift and deleveraging hold, and hence in which individual virtue ends up being collective vice.
So what will happen? In the end, I’d argue, what must happen is an effective default on a significant part of debt, one way or another. The default could be implicit, via a period of moderate inflation that reduces the real burden of debt; that’s how World War II cured the depression. Or, if not, we could see a gradual, painful process of individual defaults and bankruptcies, which ends up reducing overall debt.
And that’s what is happening now: as this story in today’s Times points out, the main force behind the gratifying decline in consumer debt appears to be default rather than thrift.
So basically, we can do this cleanly or we can do this ugly. And ugly is the way we’re going.
More Here..


  1. I think it’s fair to say that a majority of economists believe that excessive private debt played a key role in getting us into this economic mess, and is playing a key role in preventing us from getting out. So, how does it end?

    Bullshit. This is pure misdirection. Capitalism was dead by 1950 without the life support of debt. Now that life support is failing, and there is no reviving the patient after that. The patient is Capitalism, and it's time to say farewell, once and for all.

    What follows in its wake? Mayhem, and then it's anybody's guess, but I would say a form of feudalism, if we're that fortunate.

  2. Ugh, I come here to read ALTERNATIVE NEWS I can't find elsewhere, not the pap upwelling from that idiot MSM shill Krugman, who wouldn't recognize the true origin of debt saturation if it hit him in the face... which it won't, until the bottom finally falls out and he's facing feudalism without an ivory tower.

  3. I say the same...If Fuel becomes too expensive then mobility dies...Once that happens it's all about mini-fiefdoms.

    It's our nature to gravitate to a clan society...I just hope I make it to the upper part of the hierachy after "The Great Riots" and "The Great Die-Offs."

    LOL it's like a bad sci-fi book...But it all lands on the availability and price of fuel...Americans have no REAL idea of how the world works without cheap,easily attainable fuel...Without it we're another Yugoslavia in the making.

  4. Anarchy...feudalism...chaos it’s anyone’s guess at this point. Give the NWO/TPTB kudos for years of mind control via the mass media, fluoride, education where normal citizens would be up in arms rioting as seen in Greece, Americans seem to care less about the empires decline as long as we have beer, football, dancing fools and video games. Some of us are awake & preparing but utterly disgusted by the ignorance displayed by fellow Americans. Revolt by the populace should have occurred after 9-11 with trillions missing but our lack of response laid the groundwork for the empires dismantling. Slavery will soon replace the Middle Class and our New Masters will pale in comparison to the “Grand Inquisition”. What have we become…


  6. I agree that the problem started not with private debt. That is simply the rich trying to push the blame on everyone else. The problem was
    greed. Greed of the rich and greed of the stupid.

  7. Yes, 11:36 But who will come out the winner? Those who have worked hard,honest, and played the game? What about the one's who tried to beat the system (credit cards,student loans, big cars, big houses) and can't possibly pay for them. Hope that we are all buying AG & AU! Maybe a little "other white metal"?

  8. "And ugly is the way we’re going.', this is what is happening. We are pretty much past the point of who what why and how. We have been discussing this in this blog for years now.

    Its happening now, should be quite interesting to see how the sheeple slaves react, and quite scary.

  9. 12:54 The ones who really beat the system sold their houses in 2005/2006, instead of taking out home equity LOANS. Duh! Many of these folks can be found at or Best of luck to all.

  10. The prediction that everyone will form these tribal clans based on violence and mad max style philosophy is the perfect example of how movies, tv and theother media have totally brainwashed populations.

    After a day or so, most people will be dead from dehydration, those that are left over will die after their water filter stops, or from illness due to contaminated water. People will not be chasing each other around looking for gold and tins of beans. How will the water system be kept operational if the country is bankrupt? i'll wait for someone to fix that problem.

    This is what happens when you forget nature.

  11. The tea baggers have driven jobs away. They demand employer paid healthcare at a doctor of their choice. This for profit healthcare will bankcrupt us. A public option would have taken the burden from employers.

    Lost your job? Thank a white trash tea bagger.

  12. 7:46 Keep on hoping for Obooboo to pay your
    mortgage too. idiot

  13. 7:46 thats the only reason people are loosing
    jobs?? :stuck on stupid

  14. 4:00: You can get water from rivers and wells, the majority in polluted city areas though will be out of luck. But yes, water, power and food will be the important resources people will need.

    You can try hoarding as much of it now as you can, but I don't know that it will be a perfect solution. Your best bet is to get a well and live somewhere isolated.

  15. It is foolish when everyone acts like sheep and does the exact same thing. That is what caused the bubbles. so now people should save? Yeah borrowing is at a all time low. Assets are cheap. Interest income is nothing. actually bank interest will not keep with inflation.

    Of course I am not advocating major leverging now, but to go on a cash basis is just as dangerous.

  16. FYI, the tea party is funded by biollionaires. They use that low class white trash to do their dirty work. Imagine citizens demanding less benefits and tax cuts for the rich. They are true idiots.

  17. not one comment about fearging god, or accpeting christ? the one world order is a rising, gog and mag or next, folks no amount of money food,or assets will save this world . only christ will save it. Think not . open your eyes and look at the world. Prophecy is being fullfilled as we speak. Look if you dare.


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