Why We Need A Recession - NOW
MSN's Markman is on the mark again in Why we need a recession, NOW... echoing the Nattering Ones concern...
Debt in the U.S. economy over the past five years has grown at a pace 3X faster than income.
The punch bowl of cheap money and debt should be taken away, ending the drunken party. To minimize the pain, we should pay the piper now, rather than later.
Banking analyst Richard Bove at Punk Ziegel:
"Nominal gross-domestic-product growth has advanced at 3% while financial debt has grown at a 9.7% clip to $13.8 trillion."
"That is an unsustainable pace, the type that typically leads to the big splats that academics call recessions...
as consumers collectively quit spending, retailers see inventories pile up, manufacturers fire workers, unemployment explodes and wage growth collapses.
The big banks have to find a way to retain investors' confidence despite a January that is likely to feature many of the same problems we witnessed earlier this month.
Bove contends that for every $1 in uncollected debts that they have written off so far...
the banks have uncovered another $2.50 from failed mortgages, auto loans and commercial lending.
"Bad loans are going onto their balance sheet faster than they can write them off."
A debt-led recession punctuated with joblessness and foreclosure is almost certainly en route.
The only questions are whether it comes early next year or in 2009, and how deep a hole we'll need to dig for the burial."
Debt in the U.S. economy over the past five years has grown at a pace 3X faster than income.
The punch bowl of cheap money and debt should be taken away, ending the drunken party. To minimize the pain, we should pay the piper now, rather than later.
Banking analyst Richard Bove at Punk Ziegel:
"Nominal gross-domestic-product growth has advanced at 3% while financial debt has grown at a 9.7% clip to $13.8 trillion."
"That is an unsustainable pace, the type that typically leads to the big splats that academics call recessions...
as consumers collectively quit spending, retailers see inventories pile up, manufacturers fire workers, unemployment explodes and wage growth collapses.
The big banks have to find a way to retain investors' confidence despite a January that is likely to feature many of the same problems we witnessed earlier this month.
Bove contends that for every $1 in uncollected debts that they have written off so far...
the banks have uncovered another $2.50 from failed mortgages, auto loans and commercial lending.
"Bad loans are going onto their balance sheet faster than they can write them off."
A debt-led recession punctuated with joblessness and foreclosure is almost certainly en route.
The only questions are whether it comes early next year or in 2009, and how deep a hole we'll need to dig for the burial."
Comments