On Sep 16, 2008, at 10:54 PM, Sabri Oncu wrote:
Julio:
If FIRE (the level) is large relative to GDP (and it must be around
20%), deflating FIRE deflates the whole economy.
What are you talking about Julio? Now, this is information comes from
"Bad Money" by Kevin Phillips, 2008, and he claims that his
information comes from Federal Reserve Flow of Funds Accounts of the
US. If this guy is not a liar, the domestic financial debt as
percentage of the US GDP in 2006 was 107%. Does this "domestic
financial sector" not what FIRE mean? And, it is highly likely that in
that he is not even counting the debt associated with such derivatives
as CBOs, CLOs, ABSs, Whole Loan CMOs (the father, or mother, of CDOs),
CDSs and the like in that alphabet soup of things, who knows? Maybe he
does, maybe he does not! But bet that not all of them are included.
You are confusing the flow of funds/debt accounts with the national
income accounts. If FIRE-derived gross income (wages+profits
+depreciation) does account for one fifth of money GDP that is indeed
an exceedingly large share, especially since the entire sector is
unproductive (that is, contributes nothing to the real national output
of consumption and investment goods and services).
Shane Mage
"Thunderbolt steers all things...it consents and does not consent to
be called Zeus."
Herakleitos of Ephesos
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