Perhaps. I'm not sure if one can always choose one's medicine, though.
Marc Faber of the Gloom, Boom, & Doom Report:
<<< Quite frankly, I take the view that, for example Japan, after the bubble burst in 1989, would have been better off if they had squeezed out the weak players, probably during ’91 -’92. Had 10%-20% of the companies gone bankrupt then, like in the S&L crisis in the US, you would have had a market clearing, and the market would have taken care of the restructuring. Instead, by having zero interest rates, the government supported bankrupt companies that have continued to accumulate debt. To the extent that, in the year 2000, the government’s debt as a percentage of GDP had risen to 140% from 40%. So today you have a potentially more explosive situation in Japan than you would have had, if you had taken the pain in 1992. I think the Fed ’s big mistake was to bailout LTCM, because that created an additional bubble on an already inflated market. >>>
And, a great comment about the earnings boom of the 1990s:
<<< Another problem in the aftermath of a capital spending boom is something Bridgewater Associates recently has written about: the front loading of earnings. It arises because the seller in a capital transaction can recognize revenues right away, but the buyer depreciates that asset over 5 or 10 years. As long as the boom continues, that produces a front loading of earnings. But when the boom comes to an end and capital spending slows, a so-called negative accelerator principle comes into play and can lead to sharply lower earnings. >>> |
