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Politics : Ask Michael Burke

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To: Nadine Carroll who wrote (66732)	8/25/1999 10:35:00 AM
From: Mike M2	Read Replies (3) of 132070

Nadine, I heard about Glassman's nonsense but I haven't read it. Do you have a link? One of the major flaws in the current new era thinking is the role of unfettered credit expansion when the only limit seems to be demand. Anyone who runs a household understands ( I hope) that your debt levels cannot grow faster than your ability to service the debt indefinitely. The credit bubble has been a major force fueling the stock market bubble. To maintain its stimulative effect credit must expand at an ever increasing rate but obviously at some point defaults and delinquenies will rise and the willingness of both creditor and debtor to originate new debt will decline. At this point we have deflation - the contraction of credit. The same easy credit that fueled the rise of asset prices ( finacial and real estate) now works in reverse. Which exposes another problem with credit bubbles - extending credit based upon asset values rather than ability to pay means the number of troubled loans will increase dramaticly when the bubble bursts. The new era hypsters conveniently overlook this reality. Mike ho ho ho

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