Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: zonder who wrote (1781)	3/11/2004 9:57:07 AM
From: Wyätt Gwyön	Read Replies (4) of 116555

the key things to understand are the massive debt levels in US private sector, and lack of income growth. without income growth, spending can only increase through debt increases--credit expansion is basically the post 2001 expansion in a nutshell. the problem is, consumers are now in uncharted territory in terms of debt levels and at historical extremes in terms of servicing levels despite low rates. the high absolute debt levels make significant incremental debt gains (and hence spending increases) all the more difficult, even as wage pressures force credit contraction in the face of servicing woes. thus the consumer is likely to crash, setting in motion a deflationary debt depression that will probably affect all industrialized nations. weak retail sales ex-autos today just another nail in the coffin. when the job-weak US consumer keels over, as he must, the whole world recovery is dead.

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