elmatador,
Capital may not be going overseas at all. After the shock of seeing their portfolio's smashed during the bear market, folks who ran up debts during the booming 90's may now be paying down their debts. After all, bank accounts and CD's in the US are paying very little interest, some folks are shy of putting money into mutual funds after the bear market, so why not pay off the mortgage?
Impossible, all the figures say consumers continue to pile up debt? I believe those figures lag quite a bit. Many people have paid off their mortgages or are planning to do so. This makes demographic sense, Baby Boomers are at the age where they should be at least thinking of paying off their mortgages.
If they can't do that, they will cut down on other credit to save money to do so. They watch the news, see their neighbors becoming unemployed, begin to get a little frightened, the purse snaps shut. This seems to be happening right now. The last month or so, I no longer hear folks talking about their latest purchases, instead, they are talking about paying off their mortgage, paying off their credit cards, the pleasure of not having any car payments, how poor business is or how slow the factory is. IF this is so, Greenspan will not be able to pump liquidity to counter millions of boomers who have suddenly gone miserly (or even relatively Scrooge like).
With a debt based currency, extinguishment of debt equals
extinguishment of liquidity.
Recession would be painting a rosy picture of it. I expect another dip and a bigger one at that.
Best,
Roebear |
