Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Seeker of Truth who wrote (35929)	7/10/2003 3:00:39 PM
From: energyplay	Read Replies (1) of 74559

BCA on the Debt Supercycle - bcapub.com Note decline in corporate debt after the end of 1990 recession. We are seeing a decline in corporate debt now. What gives some people hope for a decline in consumer debt are demographics - baby boomers getting closer to retirement, they start saving more and reducing debt. Also, their kids will have finished college , and will (hopefully) stop being a drain on the family finances. The another positive factor is at thes low interest rates, paying down debt is MUCH easier. A significant fraction of the people refinancing the last two years are opting for shorter mortgages. One other positive factor are the low rates on money market funds, etc. If you are getting less than 1%, and you don't like the stock market, paying down the mortgage still gets you a 4.5-5.5 % return. Several dangers in the high level of consumer debt, of course - the newest one being that the FED no longer has an option to reduce mortgage payments by cutting interest rates. This means that inflation is critical for the next few years, before there is too much activity in paying down debt, which destroys money and is highly deflationary. Right now the markets seem to think that the massive fiscal and monetary stimmulus will work for a few years.... This is very much how things looked in 1990-1992. The weak economy became stronger in the mid 1990's, and many (but not all) of the problems were fixed or reduced.

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