Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (108756)	6/14/2001 12:04:04 PM
From: yard_man	Read Replies (2) \| Respond to of 436258

I think the aggregate and the information for individuals sectors are both important. I was trying to answer your counterpoint -- a reasonable question -- are all increases in debt necessarily bad? What I tried to say is: Of course not! Debt taken on in pursuit of a potentially profitable venture is good ... I think you need to look at both the current conditions and expected future conditions to make that assessment. Also there are counter-examples to what might be shown in aggregates ... Corrigan's point is that the debt taken on has been increasing at a rapid pace with precious little to show for it if one looks at GDP increases, three years running and that this has been the case for a while as issuance of new debt has accelerated ... that's it in a nutshell -- you can question whether he simply "hasn't waited long enough" for the GDP to kick in and feel the effects of all that borrowing or you can look an intermediate trends in GDP growth (my preference) and say that there is a problem. You can also question whether he is looking at the right ratio, using the proper time period for the running sum, whether he has bad data or what? I believe Corrigan thinks and I somewhat agree that these numbers are bad on the face of things ... I expected valid criticisms might lie with some particulars of his method or someone might point to public spending (Kyros did this earlier I think) or something else. How long would you give GDP a chance to resume growing or catching up? The main point is this borrowing is not going into new capital equipment -- it is servicing a lot of new consumer debt and helping corps make ends meet until they get over a supposed short-lived rough patch.

To: Ilaine who wrote (108756)	6/14/2001 6:24:51 PM
From: Mark Adams	Read Replies (2) \| Respond to of 436258

I thought out a few ideas on measuring the expansion of debt vs GDP- but now I'm having trouble with the basic concept. One of those times where I have to go back and question fundamental concepts. The proposed premiss is Debt bought GDP growth. I think the premiss needs proof. Why should increased debt drive increased production? Is it possible that increased debt represent consuming past savings- deferred consumption? Well- I haven't a clear idea where I'm headed with this- I'd like some simple equation like GDP = Gross Production - Debt + Investment, but I haven't enough brain power at the moment to achieve the epiphany. I did note that the pattern of using data since 94 on many of the charts from Contrary and Prudent Bear might be related to the Fed Flow of Funds doc you linked. That data goes back 5 years, thus creating charts that included, say a decade of data, would require additional effort on the part of the writers/researchers. While going over the material included, I found some great balance sheet info, some of which I used to create these charts; rbcassociates.homestead.com rbcassociates.homestead.com rbcassociates.homestead.com