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Samnospam
Advisor

how debt ruins systems

Black Swan author Nassim Nicholas Taleb on fragility, centralization, and capitalism http://reason.com/archives/2013/03/24/how-debt-ruins-systems
7 Replies
hardnox604008
Advisor

Re: how debt ruins systems

Antifragile is a good read.

 

Internal contradictions abound in this age but one that is near ubiquitous is hearing people whose wealth was created via controlled inflation going through near existential anxiety over the "coming hyperinflation."

 

Same concerning debt.  Private debt is a much bigger deal than public debt but you don't hear that from your basic local oligarch who owns a dozen burger hooches and strip malls; or for that matter the guy who thinks it is no big deal that he owes the bank $800K on the contract quad finishing unit out back.

 

Our system is really astonishingly anti-antifragile.

r3020
Senior Advisor

Re: how debt ruins systems

Debt is only an uncontrollable problem when you control interest rates. If interest rates are free fluctuate it will control debt.

bruce MN
Advisor

Re: how debt ruins systems

So everything is OK right now then?  Nobody is "controlling interest rates".  The Fed is palying "hands-off", letting them nestle right where they are and have been for a while.   Because if nothign else, they don't want you to get upset. 

 

You want them high, no doubt, and if the Fed decided they were going to raise them for no other reason than to satisfy you personally you'd be on here the next day screaming about deflation and how the damned Fed was tanking your holdings and weakening demand for your production.

 

There is a spectacularly free market in money right now.  All you want. And at virtually no cost if you are sure what you collateralized it with and spend it on can hold it's value. 

bruce MN
Advisor

What you say re: public v. private debt nox

hardnox604008
Advisor

Re: how debt ruins systems

http://krugman.blogs.nytimes.com/2013/03/26/the-unnatural-rate-hypothesis/

 

Some discussion of that question here.

 

I'm more inclined to the view of the ig-nobel laureate James Howard Kunstler:

 

http://kunstler.com/blog/2013/03/money-worries.html

 

Paraphrasing his view:

 

Price being set by supply and demand it shouldn't come as a surprise that the natural rate of interest is exceedingly low because there is a massive excess of wealth.

 

That is becasue wealth has been being counterfeited willy nilly for the better part of 30 years.  Which is an existential problem because there never has been a person who acquired what could be regarded as wealth who didn't think he deserved it and that the entire purpose of the social/economic system was to make sure he preserves it.

Samnospam
Advisor

Re: how debt ruins systems

And yet I believe I've read kman talk about how Volcker defeated inflation with high interest rates.    

 

Honestly,  the fed stops purchasing treasuries, and debt in general, does anyone not think rates will go higher?  A buyer to the tune of $85b a month doesn't have an affect on interest rates?  

 

 

Craig's Brother
Senior Contributor

Re: how debt ruins systems