Jason Moran
Friday, October 03, 2008
  Deleveraging, Depressions, and Bailouts Oh My!
I hate those greedy, evil and selfish banks as much as you do. This predicament is a terrible spot to be in. However, do you want to have another depression? The depression was the result of a "do nothing" policy. The government never stepped in and things were pretty bad for a while. They would have been worse if a world war didn't start up after a few years.

Anyway, $700b bailouts suck, too. I've been paying my mortgage and other debts, so why should I take on more to cover the sorry louts that can't pay up (and to cover the banks sorry behinds for ever approving them in the first place!).

However, have you ever heard of The Paradox of Deleveraging? The same principal carries in the opposite direction. If *I* am thrifty then *I* save money. However, problems happen when *everybody* does the same thing. If *everybody* suddenly becomes thrifty then they do not save money! By spending money I am providing somebody else's paycheck. If everybody stops buying things then *I* do not have a paycheck because of how everything interacts. The paradox of deleveraging is similar because it isn't one or two banks failing - it is all of them!

The third option that isn't being talked about is nationalization a la Sweden a few years back. Not everybody is a fan of it, though. Fannie Mae and Freddie Mac are already pretty much nationalized...so why not some more financial institutions? I haven't come to a conclusion on this one yet.

-<---------->-

I did want to say that the powers that be are finally checking into the silver market. It seems that when demand is through the roof, supply is pretty much gone, yet prices go down it raises some eyebrows.

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Comments:
You know, I'm beginning to think I'm "the man behind the curtain" here.
 
Nationalization? Do you mean socialism or communism? Both of those non-capitalist, ultra insane government structures are looking a lot more frightening with every congressional decision and candidate speech.
 
p.s. How are bronze and copper doing?
 
This is just a guess as to what the driver is, but I'd imagine the biggest consumer of copper is electrical wire. Copper is down hard, maybe 40% off its peak. Obviously home construction has all but ceased.
 
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