Thursday, March 25, 2010
Why Do the Unfunded Liabilities need to be Liquidated
Why Do the Unfunded Liabilities need to be Liquidated?
After the peak the system must find a bottom, the problem is the system has to reach it's maximum descent. It's a wave or cycle.
You have more and more unfunded liabilities, who is going to fund them, how does it get funded. Are the unfunded liabilities going to be happy when someone doesn't fund them? I doubt it.
Once you get into a death spiral, that's it. In Europe in the 30s they were dumping grain out at sea to try and get prices up while people were starving onshore.
Now consider today where virtually 95% of all people walking around can't even fund their own water supply. The 30s were slow death, the world went into a depression in 1932-35 by 1937-1939 it was back in a depression. The world with the use of Hilter sped the process up from slow death over maybe 40-70 years to get down to about 20 years using blitzkrieg style of liquidation.
In the system that has been constructed, you hit your peak and collapse to the maximum bottom... a wave. There really are no slowdowns if you look at federal reserve Z1 report over the last 66+ years, not that I can find. You are either supplying and demanding what is needed for the equation to sustain itself or it begins to collapse. The only real slowdown I can see from the Z1 report is maybe a slowdown of one quarter in 2000. Now we are on the 3rd straight quarter of negative credit creation, and the only reason the system is even standing is Uncle Sam is trying to build a bridge across the gap... the thing is the gap will get wider and wider. Uncle Sam would have to have unlimited power to keep building the bridge.
It's misinformation that banks are not willing to lend, there just isn't even close to the amount and the amount of people willing to take on more at the 2007 rate, let alone more to keep the equation functioning which must be growing exponentially.
The price is always paid at the end, when a system based on credit no longer exists or in a form that is functional. The people that claim you can let some bad assets be marked down and then the system just keeps going is misinformation. If the credit market has peaked, that's it. If the credit market hasn't peaked then of course you can still write down large assets within the growing credit market.
Even after WWII the growth rate was actually kind of weak even with the large liquidation, but in the years that follow huge population growth helped since the people that were still around knew the fraud.