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October 01, 2009


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Used to be in interest-bearing accounts or relatively safe bonds, medium and long term.

But if we are in perpetual low-to-near zero interest environment, what then ?

I'd love to see some informed speculation about the relationship(s) between interest and (perceived and / or real) risk ... and yes, I wonder what the role / purpose of "interest" is, now in an environment that has become distorted by newfangled forms of packaging risk as product.

And what that means for the visibility and non-visibility of mirages.

Phil Cubeta

Add inflation to the mix....


re: interest or re: visibility of mirages ?


Phil Cubeta

Well, if you invest in low yields bonds and inflation returns, down go the bonds. Or, put another way, the purchasing power of your interest payments goes down and down. Buy an apple tree, on the other hand, and "annual growth" is a measured in bushels.


Sort of points out the thin air that financial assets are built from.

Reading the article reminds me of my reaction every time I hear some media person saying that the economy is not bouncing back because consumer demand is still down. Well, du'h, you scammed everyone out of their money already, nobody has anything but the super rich. They already borrowed past their limit and can't get any more. They just don't get it, after the money moves to the big buckets it stops. All leveraged investments are wiped out and now those remaining standing, the financial ologarchs, hold all the tokens.

Well, game over, put all the money back in the Monopoly box and start a new game. All the bailout could ever have accomplished is moving the end game a little further out. Actually, that's a best case scenario, in reality the bail-out is pure "moral hazard" in financial terms. AIG's counterparties were made whole when they should have taken a big hit for their risky positions.



Phil Cubeta

"after the money moves to the big buckets it stops," well put. Cash for clunkers will fix that, right?


I just can't get over the image of a greedy few, with holdings in millions, sometimes billions, the plutocrats, saying to the indebted masses, "You just have to spend more." Wrong!

Considering Geoff's comment that monetary systems are decision making systems, and how it is functioning now, we have to look at the plutocrats and how they are making decisions. They could choose to give more generously in a downturn with the understanding that it is what is necessary to reverse the trends. Instead there is evidence that they are hoarding in fear as if they were exposed to the vicissitudes of the market like a dumpster dweller.

Message to fix the economy: If you have, give more, give to those who will use it better than you.

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