Friday, January 15, 2016

FTO school: what's occurring in the economy

It's the debt, and it goes a little something like this.

A corporation has a large debt to service.

Debt is overhead, net is what is left after the debt is paid.

Debt increases as players attempt to stay in the game in an environment of declining net.

Banksters also must attempt to stay in the game. Their products also decline in price (interest).

Negative interest rates are a punishment for those who refuse debt. It's a new rule enacted to keep  the game going.

Are you now burning the furniture to stay warm? The roof and walls? Your clothes?

This cycle works more strongly for private housing and mortgage debt. Most bank assets (i.e. loans) are made against real estate (household and commercial).

Once consumers start to reduce the consumption of corporation's products,  corporations *must* cut prices in an attempt to increase sales, because they *must* service their debt.

Less profit causes corporations to layoff employees, which reduces consumption still further.

Other corporations selling the same product *must* also cut prices.

It's a race down into widespread bankruptcy and bank failure.

Once this process starts, only widespread bankruptcy, debt forgiveness, or inflation can arrest it.

This cycle is a *systemic* property of capitalism.