[Shaved Monkey]

This is what I woke up to over my bowl of gruel (poached eggs on sourdough toast)
Australian CEOs gloomy about 2016 as world drowns in $200 trillion in debt
$this->bbcode_second_pass_quote('', 'T')he world is burdened by $200 trillion in debt that won't get paid back and will ultimately destroy emerging market economies and global growth, according to ASX chief executive Elmer Funke Kupper.

Mr Funke Kupper's comments come as a new survey shows Australian CEOs are less optimistic about growth in the world economy, as well as their own company's ability to make money in the coming year

[MonteQuest]

$this->bbcode_second_pass_quote('MonteQuest', 'I') think the real contraction started in the early 70's with we went off the gold standard and the first oil shocks occurred. Since that time, GDP has only grown due to increased debt. Now, more debt doesn't grow GDP, it hinders it.

[MonteQuest]

It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they cannot save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying.

It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment.-- Marriner Eccles, chairman of the Federal Reserve under FDR.

This is why the growing income in equality is such a threat and why the rich abhor any "socialist" measures to rein it in.

[Pops]

$this->bbcode_second_pass_quote('MonteQuest', 'I')'ve already explained this several times.

[MonteQuest]

$this->bbcode_second_pass_quote('Pops', 'N')o, you just keep saying 'banks don't lend out reserves'

Of course they don't 'lend out' reserves Monte — they are reserves.

Reserves are not lent — they are leveraged — 10 to 1

[Pops]

$this->bbcode_second_pass_quote('', 'T')he volume of excess reserves in the system is what it is, and banks cannot reduce it by lending.

[Pops]

Here is the NY fed (since you didn't believe Minneapolis Fed)
$this->bbcode_second_pass_quote('', 'S')ome observers have expressed concern that the large quantity of reserves will lead to an
increase in the inflation rate unless the Federal Reserve acts to remove them quickly once the
economy begins to recover. Meltzer (2009), for example, worries that “the enormous increase in
bank reserves — caused by the Fed’s purchases of bonds and mortgages — will surely bring on
severe inflation if allowed to remain.” Feldstein (2009) expresses similar concern that “when the
economy begins to recover, these reserves can be converted into new loans and faster money
growth” that will eventually prove inflationary. Under a traditional operational framework,
where the central bank influences interest rates and the level of economic activity by changing
the quantity of reserves, this concern would be well justified. Now that the Federal Reserve is
paying interest on reserves, however, matters are different.

[MonteQuest]

$this->bbcode_second_pass_quote('Pops', ' ')Put another way, banks are getting paid about as much every year for not lending money as 1 million Americans received for mortgage modifications and other housing aid in the whole of the past four years...

Moreover, instead of using the bailout money as promised – to jump-start the economy – Wall Street used the funds to make the economy more dangerous. From the start, taxpayer money was used to subsidize a string of finance mergers, from the Chase-Bear Stearns deal to the Wells Fargo­Wachovia merger to Bank of America's acquisition of Merrill Lynch. Aided by bailout funds, being Too Big to Fail was suddenly Too Good to Pass Up.

[MonteQuest]

$this->bbcode_second_pass_quote('Pops', ' ')They argue that the Fed can control this lending by increasing the rate they pay - not that the increased excess can't be loaned.

[MonteQuest]

This whole money system is a very confusing topic. When you say the banks are being paid to not make fractional loans on the excess reserves and I say no, having excess reserves doesn’t affect loans, there is only one way I can think of that excess reserves can influence loans. Excess reserves could be used to meet the 10% reserve requirements necessary to make a loan if the current reserves a bank held didn’t meet the 10% requirement. One bank could also lend to another these excess reserves. But, banks haven’t been experiencing a reserves requirement shortage, now or since the 2008 crisis. Connect the dots.

Or, I guess you could say holding excess reserves increases the amount of loans they could make, given new loan demand.

[Pops]

$this->bbcode_second_pass_quote('MonteQuest', 'T')his whole money system is a very confusing topic. When you say the banks are being paid to not make fractional loans on the excess reserves and I say no, having excess reserves doesn’t affect loans, there is only one way I can think of that excess reserves can influence loans. Excess reserves could be used to meet the 10% reserve requirements necessary to make a loan if the current reserves a bank held didn’t meet the 10% requirement.

[MonteQuest]

$this->bbcode_second_pass_quote('Pops', ' ')The only thing that keeps the banks from converting all that excess into loans is they are earning more from the taxpayer at 0 risk.

[Pops]

$this->bbcode_second_pass_quote('MonteQuest', 'N')o, what keeps the banks from converting all that excess into loans is that their existing reserves are enough to cover the 10% reserve requirements for loans.

[MonteQuest]

$this->bbcode_second_pass_quote('Pops', '')$this->bbcode_second_pass_quote('MonteQuest', 'N')o, what keeps the banks from converting all that excess into loans is that their existing reserves are enough to cover the 10% reserve requirements for loans.

[MonteQuest]

$this->bbcode_second_pass_quote('pstarr', 'S')o now that you two guys have worn out the pin-head, can we agree that the Great Contraction has begun? That we have run out of planet and increased breeding capacity?

[MonteQuest]

The biggest factor affecting bank loans has been the tightening of standards since the subprime fiasco of 2008.



Yet, even so, bank loans are back up to where they were pre-crash.



So, much for the argument banks aren't lending. Some loans, like auto loans are subprime.

Now, I am open to the argument that the little guy isn't getting the loans he needs.

But it appears, that consumers are using discretionary income to deleverage existing debt, rather than spending, which is why we have had a weaker recovery. All comes back to too much debt.

[MonteQuest]

$this->bbcode_second_pass_quote('pstarr', 'S')o you guys came to an agreement. I've been waiting for this for my entire time here. You are obviously the two most brilliant generalist peakers around, with a multi-disciplinary grasp of not only oil geology but also economics, ecology, agricultural and just plain simple brainstorming. I've always looked to your debates as edifying to the extreme. When you come to an agreement after much hashing and teeth-gnashing then I know to expect. Truthiness. So is it hyperinflation, great deflation, excitement or snoozeville?