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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (101094)	8/20/2009 7:45:31 PM
From: Amark$p	Read Replies (3) \| Respond to of 116555

Agree: "Total Credit/Debt as a percentage of GDP will continue to climb" For the short term (next 2-5 years), this ratio is likely to climb well over 400%. But my question to Mish/you is: "how does the US reduce its total credit market debt as % of GDP from 376% to a more reasonable and sustainable level of about 175%." without default (i.e. for the banks to be paid back with cheaper dollars.) Mish comments as I understand them preclude default (e.g. banks being paid with cheaper dollars). Your comments suggest banks will be paid nothing at all but will have a bunch of foreclosed property: "It's a good guess that between now and five years from now, all of these heavily indebted consumers and businesses will have finally thrown in the towel and eliminated their debt through foreclosure and bankruptcy." Somehow this debt/credit ratio fell during the great depression from an unsustainable level of 260% to 140% within 10 years. (see previous chart) How did this happen? It appears FDR's 1934 dollar devaluation had some impact on this decline from 260% to 140%: financialsense.com What I cannot understand is my interpretation of Mish position that US Govt policy will not allow the banks to be paid back with cheaper dollars and/or find some way to devalue the US$. Or your apparent position that the banks would prefer no payment at all and just want the foreclosed property and a bunch of bankruptcy petitions from consumers (this is likely not your position, just my simplistic interpretation thereof, sorry in advance for the misstatement). Just seems to me that banks somehow get paid back with cheaper dollars over the next decade as apparently happened from 1934 to 1944.