Zeev's Turnips Patch-No Politics (ZEEV)

[Dr VanNostrand]

Hussman's take on current economy:

The salient problem in the U.S. economy isn't the precise level of already low mortgage rates. It isn't "uncertainty" about taxes or health care. The problem is that people aren't spending as they did in recent decades, because that spending was largely debt-financed, and the pressures now run in the opposite direction. We still haven't restructured mortgage debt on millions of homes that are underwater. Property values are hitting new lows. Hundreds of thousands of properties are delinquent and yet the mortgages are being carried by the banking system at face value. Banks, knowing this, are clearly reluctant to extend their balance sheets further. Government deficits of nearly 10% of GDP are presently required to cover the gap in private incomes and spending. Indeed, most of what we observe as personal income growth is attributable to transfer payments from government.

And that, in Frank Zappa parlance, "is the crux of the biscuit".