Re Gerald Jackson's comment: This has not stopped [Greenspan] from presiding over a credit expansion that exceeds that which took place during the 1920s and which brought on the Great Depression...
I have pondered over "credit bubble" notion for some time. I share the opinion of most of regular participants on this and the Myth thread that stocks look overvalued, and are accordingly a very risky investment proposition. However, I think it is a stretch to say that the current rate of credit expansion is unprecedented.
I looked at total real private sector debt growth from 1959 to year-end 1998 (sourced from the Fed Flow of Funds report, measured in real terms using the GDP deflator). According to these figures, we are definitely now close to the high end of the range (around 8% year-over-year), approaching the extremes previously seen in 1960, 1964, 1973, and 1985-1987. But we are not at unprecedented levels, at least according to this measure.
I absolutely agree that the recent debt growth rates (courtsesy of Easy Al <g>) are very good reason to be concerned. The recent spike in margin debt growth, and all of the maniacal signs we have seen in the internuts and other tech stocks, have also provided good reason to fret. Simply stated,the stock market does not look at all healthy.
But I question whether Mr Jackson et al. are overstating things somewhat with regard to the debt picture. We are vulnerable -- no question about it. Yet one should not need to resort to hyperbole and conjure up images of 1920's excesses to make what is otherwise a credible case.
Agree/disagree?
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