Tuesday, August 6, 2013

pk punts the snail's shell

why are we snailing along?

1) "a large overhang of private debt"


2) " a still-depressed housing sector"


3) " contractionary fiscal policy"



but here comes the gilding of the lilly

 a "  well-established fact"

" recovery tends to be slow
 after recessions
caused not by
 tight money
but  by
 private-sector overreach"

ie recovery from a gratuitous CB crimping move
         in particular aimed at       
nominal    wage growth

mechanism "
 slowing net credit flows... slowing credit induced spending
  leading to cuts that increase the ratio of  layoffs to  hires
loosening job markets ...lowering wage expansion

---tight money has  sickeningly bad associations
its tight credit friends tight credit ---

look at points one and two
both really are about the same thing
 equity to debt ratios
lot to mortgage
stock value  to bond value
human capital value to personal loans  etc etc

see again its all about a reactionary  tightening of  credit

a pro cyclical discretionary decision
emerging simultaneously out of  the composite  financing sector

triggered and enforced
 by the lender of last resort
so equally contrived as the overt wage crimp

sure  here its  about
collateral value implosion 
but that was contrived too

both the debt build up and the sudden turkey roping