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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Elroy Jetson who wrote (80255)3/23/2007 4:32:51 AM
From: Broward Horne  Read Replies (1) of 110194
 
"income available for debt payment"

Exactly, but income and debt are symbolic representations of physical goods & services. I like to think of K in terms of what it represents - the net new goods & services produced.

For me, the interesting part of the K = D X I model is its hyberbolic curve. Theoretically, you can carry an infinite amount of debt if you can find investors willing to loan money for zero interest. That won't happen, of course, but the Feds have already pushed into territory where I thought the model would break down.

I'm amazed they're getting people to front money for a 5% return in a 7-10% inflationary environment. But that's why the savings rate has gone negative. Empirically, more and more people are figuring out that it's just stupid to save and altering their behavior.

We've got to be close to a breaking point.
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