Steve Keen: Why 2012 Is Shaping Up To Be A Particularly Ugly Year - By Adam Taggart (13/6/12) PDF Print E-mail
Adam Taggart   
Wednesday, 13 June 2012 08:53

Chrismartenson.com

At the high level, our global economic plight is quite simple to understand says noted Australian deflationist Steve Keen.

Banks began lending money at a faster rate than the global economy grew, and we're now at the turning point where we simply have run out of new borrowers for the ever-growing debt the system has become addicted to.

Once borrowers start eschewing rather than seeking debt, asset prices begin to fall -- which in turn makes these same people want to liquidate their holdings, which puts further downward pressure on asset prices:

The reason that we have this trauma for the asset markets is because of this whole relationship that rising debt has to the level of asset market. If you think about the best example is the demand for housing, where does it come from? It comes from new mortgages. Therefore, if you want to sustain he current price level of houses, you have to have a constant flow of new mortgages. If you want the prices to rise, you need the flow of mortgages to also be rising.

Therefore, there is a correlation between accelerating and rising asset markets. That correlation applies very directly to housing. You look at the 20-year period of the market relationship from 1990 to now; the correlation of accelerating mortgage debt with changing house prices is 0.8. It is a very high correlation.



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Student Loans & The Redistribution Of Wealth - By Daniel R. Amerman, CFA (12/6/12) PDF Print E-mail
Daniel R. Amerman, CFA   
Tuesday, 12 June 2012 08:35

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Tear Up Your Paper Money - Modern Currency Is Nothing Without Trust That Governments That Use It Will Back It. And If The Once-Strong Euro Can Break, What Is Safe? - By Jim Jubak (11/6/12) PDF Print E-mail
Jim Jubak   
Monday, 11 June 2012 11:43

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Worldwide Package Coming From Fed, ECB & IMF - By Egon von Greyerz (11/6/12) PDF Print E-mail
Egon von Greyerz   
Monday, 11 June 2012 11:42

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Bernanke's Bluff (11/6/12) PDF Print E-mail
Administrator   
Monday, 11 June 2012 08:07

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