Comments on: The Age of Deleveraging http://www.creditwritedowns.com/2009/12/the-age-of-deleveraging.html Finance, Economics and Markets Thu, 09 Feb 2012 21:54:06 +0000 hourly 1 By: continuity http://www.creditwritedowns.com/2009/12/the-age-of-deleveraging.html#comment-57845 continuity Thu, 24 Dec 2009 06:57:00 +0000 http://www.creditwritedowns.com/2009/12/the-age-of-deleveraging.html#comment-57845 You started by saying you were getting ready to buy stocks, but the rest of the entry sounded rather downbeat and seemed like an argument against buying stocks. Did I miss something? You started by saying you were getting ready to buy stocks, but the rest of the entry sounded rather downbeat and seemed like an argument against buying stocks. Did I miss something?

]]> By: demandside http://www.creditwritedowns.com/2009/12/the-age-of-deleveraging.html#comment-57809 demandside Sat, 19 Dec 2009 23:14:00 +0000 http://www.creditwritedowns.com/2009/12/the-age-of-deleveraging.html#comment-57809 I do not see how this thought: "Past post-recession expansions have been built on growing credit and leverage. That will not be the case this time. We are going to see reduced lending and borrowing. Even though the federal government is running massive deficits, the stimulus portion of the debt will be running down in the latter half of 2010. There will be little political will to continue with massive stimulus and deficits." While this is good in the long run, in the short run it will reduce GDP." leads to this conclusion: "All of this suggest to me that while there will be growth in 2010, it will be tepid by past post-recession standards." Where is ANY growth going to come from? Not consumer credit, not business investment, not government deficits, at least after the Recovery Act expires. Absent the government deficits and absent investment (I hate to use Minsky again, but he does have some elegant algebra), there is nothing left to support business profits. I do not see how this thought:

“Past post-recession expansions have been built on growing credit and leverage. That will not be the case this time. We are going to see reduced lending and borrowing. Even though the federal government is running massive deficits, the stimulus portion of the debt will be running down in the latter half of 2010. There will be little political will to continue with massive stimulus and deficits.” While this is good in the long run, in the short run it will reduce GDP.”

leads to this conclusion:

“All of this suggest to me that while there will be growth in 2010, it will be tepid by past post-recession standards.”

Where is ANY growth going to come from? Not consumer credit, not business investment, not government deficits, at least after the Recovery Act expires. Absent the government deficits and absent investment (I hate to use Minsky again, but he does have some elegant algebra), there is nothing left to support business profits.

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