Margin Call

Old Mar 26th 2013, 11:01 am
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Default Margin Call

I re-watched this movie on DVD recently, and one quote really resonated:

"If you really want to do this with your life, you have to believe you're necessary, and you are. If people want to live like this in their cars and their big houses they can't even pay for, then you're necessary. The only reason they all get to continue living like kings is cos we've got our fingers on the scales in their favour. I take my hand off, well then the whole World gets **really** fair **really** quickly, and no-one really wants that."

Thoughts?
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Old Mar 27th 2013, 6:53 am
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Default Re: Margin Call

Originally Posted by Tranmere Rover View Post
Thoughts?
U.S. debt was subsequently significantly revalued despite the transfer of risky (toxic) debt to the public, backing of major financial institutions, government bailouts, low interest rates and massive quantitative easing.

Though we don't realize it yet we're probably coming close to the limits of debt growth relative to incomes. We avoided a quick unwind by throwing everything we have at this but it isn't a sustainable situation in the long term.
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Old Mar 27th 2013, 8:37 am
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Default Re: Margin Call

Originally Posted by Charismatic View Post
Though we don't realize it yet we're probably coming close to the limits of debt growth relative to incomes. We avoided a quick unwind by throwing everything we have at this but it isn't a sustainable situation in the long term.
I think that we already at the limit of debt growth, see-sawing on the edge at the moment.

If interest rates only return back to the levels that they were four years ago then there will be a lot of pain. Historic interest rates in this country are much higher than that.

I know people that have finally taken the plunge and purchased a house recently and others that have re-mortgaged because the bank would advance them a load of new money that they didn't expect to get.

I feel sorry for them.

Last edited by Clappy; Mar 27th 2013 at 8:42 am. Reason: Spelling correction
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Old Mar 27th 2013, 8:49 am
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Default Re: Margin Call

You might find this site interesting:

http://www.positivemoney.org/

When people go into debt it increases the total amount of money in the economy, because banks create money by making loans. When they pay off their debts it decreases the money supply, via the reverse process. A falling money supply usually triggers a severe recession (imagine draining all the oil out of your car engine and then seeing how well it runs). This means that we have an economy where, if we want to avoid a recession, it is essential that the public take on new debt at a faster rate than they pay off old debt. Is ever-increasing debt a sustainable basis for a healthy economy?
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Old Mar 27th 2013, 8:57 am
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Default Re: Margin Call

Yeah, it tends to be debt level rather than the absolute value of debt. What we are saying is that there are relationships between GDP, income etc. and debt that are stretched as far as they can realistically go. You have to have a realistic chance of servicing debt, some underlying economic activity.
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