“However, by 2008’s final quarter, corporate debt reached 523% of internal funds and the high-yield EDF soared to 10.33%. At the same time, a mild recession was turning into a global calamity.”
“The Fed and BoE are once again presiding over a credit bubble, with the BoE in particular suffering a painful episode of cognitive dissonance in an effort to shift the blame elsewhere – the credit bubble is everyone’s fault but theirs.”
Can I borrow your double-edged sword?
“Well, that’s nothing to be proud of, Rusty…. 50 yaaaards.”
I have absolutely no idea how any of that is sustainable and/or realistic.
Have we passed the point of no return in terms of escaping from NIRP?
To be fair, “beauty is in the eye of the beholder,” so in that regard, if Ray wants to call a given “deleveraging” “beautiful” well then that’s his prerogative.
If those deep forces have not yet fully run their course, the end of the current expansion may be different. That end may come to resemble more closely a financial boom gone wrong, just as the latest recession showed, with a vengeance.”
“In the current environment, we have the opposite situation. Either the economy rolls over (which should be bad for stocks), or it bounces, at which point the Federal Reserve continues on its tightening path (which could also be bad for stocks).”
“Throw enough cheap money at the problem, and people will find a way. I can’t tell you where. I can’t tell you when. But I am confident that eventually, people will borrow.”
“Borrow today and repay later” logic carries an implicit bet on the future. Without an optimistic outlook on the future, there is no lending or borrowing. Debt links the present and the future in a circular way: A prosperous future cannot happen without the present, and the present cannot take off without a belief in (better) future. In this way, the very concept of the future undergoes a transformation in capitalism: It no longer represents a timeline we experience, but a concept we envision.”
“Pundits constantly shout about the dangers of governments borrowing too much. They make all sorts of scary charts, and, uniformly, put all borrowing in the same pile. Debt is bad. It will be our downfall. Stop borrowing immediately. Yadadada.”
“We have no political expertise but nonetheless recognise the palpable relief but we also understand the real problem for equities worldwide is one of high valuations, high expectations, yet still lacklustre growth and ever worrying and mounting levels of leverage.”
“We have too much debt. It’s simple math. We are screwed. Full stop.”
One of the obvious questions as rates begin to rise is this: what happens to government, corporate, and household finances?