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Deflation creates a different psychology, and it makes hoarding cash a profitable venture. This greatly reduces the incentive to loan money which hurts business.
Deflation also reduces the incentive to invest or engage in commerce. This leads to job destruction and more deflation...
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# justme Says:
C’mon, you can’t be serious. Those egomaniac jackasses at Tesla who made a $100k electric car that ran on laptop batteries? Tesla is toast.
I know two idiots who have put deposits down on that. Still waiting for the car, and oy vey, these two were worse than RE-permabulls when it came to repeating the happy talk. They seem to have shut up now.
I wonder how badly Citibank/Citigroup really is doing....is Mr. Market correct about them?
How much is Pleasanton going to be affected by 1600 lay-offs at WaMu?
It is going to be unpleasant.
William Black is my new hero.
He is the first I have seen to come out and clearly explain who the perpetrators are in this crisis, and why our government is not prosecuting them.
A MUST see.
(ignore the 2 yahoo douchebags)
justme Says:
Inquiring minds want to know — Larry and Sergey?
LOL, but no.
Two different idiots cow-orkers. One of them is still a little hopeful that Tesla will pull through.
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Perhaps the entire credit crunch could be fixed with very high interest rates. Currently, banks and other institutions have to compete with the suicidally low interest rates of the Fed and the Treasury bailout programs.
Say you're a bank and you know that a new mortgage loan has a 10% risk of default. Then you have to charge at least 10% to compensate for this risk before you can even begin to make a profit. But you can't charge 10%, because you're competing with the Fed's 2% rates, and the Fed is lending without regard to default risk. So you would be committing bank suicide to make loans in a market poisoned by the Fed's rates, knowing such loans will generate a large loss on average.
OK, the bank can get something from the defaulted loans by foreclosing and selling off the houses, but still, the point holds: the Fed is ruining the market for credit. It's kind of like American manufacturers being ruined by cheap Chinese imports, only it's American banks and savers being ruined from within our own country, by the Fed.
The directors of the Bank of England once bragged that a 10% interest rate could "draw gold from the moon". If it's credit we lack, let rates rise, and watch credit problems disappear.
Patrick
#housing