Replies to post #32721 on Zeev's Turnips Patch-No Politics (ZEEV)

[sarai]

The Credit Bubble Bulletin - by Doug Noland

The Trials and Tribulations of Speculative Finance

http://www.safehaven.com/Credit/Credit092702PF.htm

.."Very regrettably, we are reading the reiteration of the Greenspan Doctrine: Respond to bouts of rising systemic stress (“outsized implicit compensation for risk”) by fostering greater “finance” (Credit excess). I doubt history provides a more ironclad case against discretionary monetary management. For too long, the day of reckoning for past Credit and speculative excess has been postponed by nurturing only greater financial and economic imbalances. How the Fed has grossly mismanaged this unfolding fiasco goes directly back to historical revisionism of the overriding causes of the Great Depression. We have never doubted that the answer to financial and economic ills would not be found with more Credit. We are now witnessing why"...

[mlsoft]

"Now, economists and stock market experts are floating the idea of a debt bubble, in which swelled levels of household and corporate borrowing force an already squishy economy into a longer-lasting, and more punishing, downturn.

Burgeoning household debt is a familiar story, closely watched by economists because they fear it will dampen consumer spending, which has been a vital bulwark against a deeper recession.

But as Federal Reserve Chairman Alan Greenspan and others point to revived business investment as a key to a sustained recovery, those growing corporate debt levels are receiving increased scrutiny: More money devoted to servicing debt means that much less for investment, and more debt overall means more skittish lenders."
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sarai...

This is exactly what I have been saying for over a year now, other than it leaves out the fact that there is zero incentive for businesses to spend money while there is so much excess capacity, very slow demand, and they are losing money hand over fist. I think consumer demand will continue to decline and there will be no recovery until it finally recovers which will be no time soon.

Thanks for the article.

mlsoft