Skip to comments.Deutsche Bank: There's A Massive Credit Spigot About To Superpower The U.S. Economy
Posted on 11/11/2010 10:33:55 AM PST by blam
Deutsche Bank: There's A Massive Credit Spigot About To Superpower The U.S. Economy
Nov. 11, 2010, 11:57 AM
The U.S. is on the brink of a massive credit explosion, brought on by quantitative easing and a willingness for banks to lend, according to Deutsche Bank.
This bullish call on the U.S. consumer and broader U.S. economy stems from a series of charts that point to new spending for those in the U.S. and a new willingness for banks to lend.
This goes in opposition to the data released by the New York Fed this week that suggested consumer demand for credit was collapsing because individuals were choosing to deleverage, rather than spend.
But Deutsche Bank begs to differ. The say, "The Credit Crunch Is Over" and now the demand for loans is about to kick off.
Click here for the charts >
(Excerpt) Read more at businessinsider.com ...
Yes. People have realized that the level of debt they have is to high in a bad and unstable economy, so they are trying to dig themselves out of debt and get on more solid ground. This leads decreased demand, and prices drop somewhat in response.
So our federal government steps in and says we can't be having deflation! We have to increase spending! So they once again devalue the US dollar more making it in the short term harder for people to dig themselves out of debt.
It makes it easier to borrow money and easier to pay it back later because inflation means the dollars you are paying the bills with a couple years from now will be worth less.
However, Americans are already in buried in debt. If you keep making it easy to borrow even when people are too far in debt you help the economy in the short term, but it creates a bubble which comes back to haunt you.
This is the same thing that the Clinton and Bush administrations did with mortgage rates. Clinton did it because he wanted the larges economic expanision in history to be his legacy. Bush continued it because between 9/11, business accounting scandals, and recovering from the dot com crash it was the only thing keeping us out of a recession.
Now Obama needs to show some economic recovery pretty damn fast if he wants reelected. The policy may cause more harm than good in the long run, but he has to get reelected before he needs to worry about that.
The government needs to quit pushing more credit and devaluing the dollar and instead let us start digging ourselves a bit out of debt so we are on more solid footing.
Yes, it means slow growth for a while longer. Yes it means economic pain in the short term. We can't put off paying the bill for overspending forever.
Just like in 1923,
Ten Millard Mark note (10 billion US)
Volcker began the process under Carter and culminated it under Reagan.
But it took a man like Volcker.
With Bernanke and our stalwart politicians, how high would inflation have to rage before the will to impose the needed medicine would manifest itself?
Unfortunately, we may find out.
I'm afraid, you're right.
I think, it takes a combination of a Fed Chief like Volcker, WITH a President popular enough to keep the peoples mollified, and willing to endure the pain.
Reagan stood up to the challenge. And, pushed for the RIGHT kind of stimulus: Letting people KEEP more of their money.
They want a low inflation rate to boost housing prices etc.
It won’t be immediate, IMO, but things could be interesting at this time next year, as prices rise.
But when they rise further, will enough interconnected effects have been set in motion that the $4 gallon spikes to over $5. Your house may be worth more, but you’ll be spending more in energy costs to heat/cool it.
“Puttin’ out fire with Gasoline” - David Bowie.
And more in property taxes.