Okay, but let's say that every individual cashed in their savings then? Then the banks wouldn't have the money to actually return the savings. Our worldwide economy is based on the amount of "leveraged debt". If a bank has $100,000; then they are able to lend $1,000,000 to that $100,000. And that did happen not long ago. It was called "The Great Depression".
You really think that in a mass panic bank run people are going to be thinking about the long-term and what's good for the country? People will be rushing to get what they possibly can before it's completely gone. That's why bank runs have happened and why the government and Feds were incredibly scared of that happening in 2008.
I don't think most people had any idea on how close the United States was going to become bankrupt in 08. And if the US bankrupts; the world economy turns to shit. All we needed was 25%-35% of the nations people to want to cash in on thier savings and the snow ball would have been too large to recover from. Because when the people cash in, the banks would need to cash in to pay back; which would force the banks they borrow from to cash in and so on. I think a lot of people just haven't seen it first hand, therefor they don't believe it could ever happen. When something does happen; shit will hit the fan.
What the hell is mags talking about? Bank runs start because of producer goods and long-term capital projects like housing. Dude no, the consumer goods markets is the very last market to collapse, you're being paranoid.
Consumer income and oil is what leads this economy's revenue. If there is a mass sell off, or cash in on savings or investments, the value of revenue drops considerably; which would create a chain reaction of others selling off; which would cause a chain reaction of people worried about spending money; which would lead to a much lower revenue. That includes banking systems that use consumer and housing to borrow more money.
Hmm no the economy is quite diversified. Capital malinvestment from government price-fixing is what usually causes the business cycle historically. Why are banks that highly leveraged and vulnerable to bank runs in the first place? We have a public banking system with fractional reserve banking. Bad credit expansion happens in unison, and this is made possible by the board of governors at the central bank and the reserve ratio they set for all banks. The government decides how much money needs to be created, which causes price distortion. Without a market equilibrium price it is impossible for anyone to behave rationally. The central bank decides what long-term capital products cost, there is an overinvestment in the market but the market is never allowed to adjust because interest rates are never allowed to rise. As the production structure becomes more roundabout, producers realize that there has been an underinvestment in the consumer goods markets. Once the central bank fears hyperinflation the depressionary period of the market begins, which causes stagflation in consumer goods markets.
I invite anyone to read the financial collapse of 2007-08 and try and tell me I am being paranoid. This event created a "world-wide global recession" Housing, consumer spending, and employment all dropped. Mass over-leveraging created this impossible hole to come out of. The ironic situation is our government is mass leveraging right now. Our deficit is at an all-time high. Eventually, we won't have enough income vs. credit to overcome unless we take a stand and do something now. I think it's funny that people blame our issues and problems on the insanely stupid lending practices of these big banks and overlook our government practicing the same thing.
http://en.wikipedia.org/wiki/List_of_companies_by_revenue Look at the top revenue producing companies and their sector and get back to me. Retail and Oil are the highest %.
I don't think you understood my post then, since it is the government that makes all this possible. Oh don't misquote me because I agree there will be another financial collapse soon, but for somewhat different reasons.
No I am looking at percentage of jobs lost during the recession, not the amount of jobs lost. There's a difference. Sectors are impacted disproportionately.
The government is the problem. Never said it wasn't. The world-wide economic model is seriously broken. Any economist would agree that over-leveraging 10-1 will eventually create a bankruptcy. If I had a wife that maxed out all my credit cards and I had to fund seconds on all my homes to pay off the debt; only to have my wife max out the credit cards again is not even a 10-1 leverage; yet I would probably be bankrupt quicker than 2 years.
A job is a job, and the connection to the world-wide economy actually effects every sector. Let's say Joe has a metal fabrication company. They make molds for Hospital Beds. Let's say the oil industry sector drops by 20%. That in turn increases the cost of oil by 40%. Transportation costs increase by 40%; which jacks the price of the molds by 20%. The hospital bed wholesalers, then decide to purchase beds from China because they are now 20-30% cheaper than the US company. That snow balls with China requiring more steel to meet the demands of the US hospital companies; which in turn increases the price of steel. Then the car manufacturing companies pay increased premium for steel and can't afford to sell their cars at the desired consumer pricing model. The car companies and steel fabricators are both effected and they lose jobs because they aren't receiving the revenue to keep the currently employed.
Thanks man. I know I sound a little paranoid; but I just think we as the people in this country need to be a little more cautious on the government we put in office. Any congression that believes a 10-1 leverage spending is just a complete set up for failure.
No, I think they'll know before the mass panic what they'd be in for, so they would avoid the mass panic altogether. If it did get to mass panic, EVERYBODY would be fucked, and I think those with the ability to cause mass panic know this, therefore, again, they would do what they can to avoid it. I guess you missed that point of my posts.
But what if the government elected is actually creating the panic and are the decision makers for this country? What if our government is leveraged spending 10-1? Who will stop them?
