$this->bbcode_second_pass_quote('radon', '
')
Can you give a specific example where writing/issuing a derivative contract leads to additional money supply on a permanent basis?
PeakOil is You
What is the limiting factor?
Re: What is the limiting factor?
by ralfy » Sat 02 Jun 2012, 13:58:41
When the contract needs to be covered, money has to be created.
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Re: What is the limiting factor?
by SeaGypsy » Sat 02 Jun 2012, 21:39:10
$this->bbcode_second_pass_quote('evilgenius', '')$this->bbcode_second_pass_quote('pstarr', 'A')ctually those who invested in the housing bubble were correct, given the data and conventional paradigm at the time. It was widely assumed that 'god only makes so much real estate', and so it made sense to buy into the limited supply (of developed land) at any cost.
Except that you could rent and put the difference you weren't paying toward a mortgage into an asset that paid a return which was derived from economic activity. During the housing spike saving in the US actually reached a level of zero. People were taking all of their money and putting it into a thing which when they got out of it they would have no profit because they would only have to buy another one. You have to live somewhere. In that sense it never made any sense to buy into the property ladder, unless you could be the landlord.
I always saw the supposed limit of land as a manipulation of the market by planning regulation. there has never been a true land shortage, given how often the option to go up rather than out has been overlooked. In other words, the price was never based on reality, but on manipulated perception.
The people I have seen start with virtually nothing and make millions in the last few years have done so by a model very common to Asia: teaming up. When you get 10 working adults squeezing in to the cheapest unit in the city and pooling resources, buying houses then moving boarders in to pay the mortgage whilst again pooling resources to start businesses, pooling to bring in family members etc etc. By and large these families are Asian or African (here in Australia). Meanwhile the Anglos are stuck in the mugs game of nuclear families and single dwellings built at top $ funded by long term debt often at a ratio of income leaving just enough to scrape by if everything goes to plan.
There are likely to always be opportunities in this life, reduced as they may be. There is little point in grieving forever about the demise of what we have known and the loss of previously available options now gone or going. For our sanity and survival we need to be aware of the real problems we face culturally that we can actually do something about. One of the biggest is escaping the mentality of going down with the ship, getting with it on arranging lifeboats.
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Re: What is the limiting factor?
by ralfy » Sun 03 Jun 2012, 01:53:16
$this->bbcode_second_pass_quote('pstarr', '
')Money is created by new loans. A contract is an obligation, it transfers money.
')Money is created by new loans. A contract is an obligation, it transfers money.
That obligation can be met by creating new loans.
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