What economists like Paul Krugman, Ben Bernanke and others fail to recognize, is that there is a reason why the private sector is not spending, which has nothing to do with an elaborate, psychological feed-back loop. It is true that negative future expectations do reinforce a negative trend, but at some point, that trend DOES HAVE to reverse. A bottom WILL form, and from that point the economy rebounds. So what then, is preventing the bottom from forming? Enter, that four letter word, D-E-B-T. The reason that the economy cannot recover, and the reason that the private sector is not spending, is because it is in the process of deleveraging from a debt binge that has gone on, arguably, for almost 4 decades in the US, and with a bit more variation in Europe.

The problem is not a lack of demand. This is a symptom. The disease is a stock of nominal debt so large that it has created a negative drag on the economy. Attempting to carry this debt, i.e. not defaulting on it or not forgiving it, is a path towards feudalism…towards serfdom. This is why we have bankruptcy laws for the private sector. The notion that this should not apply to government debt as well is bank propaganda.

  1. There hasn’t been a bottom cause no one is sure what will happen one day to the next… Government parties fight over the stupidest shit… Which then drags the littlest of things out for the longest of time… Instead of spending time on real issues and real solutions they just have useless pissin matches over nothin…You can’t make plans cause you don’t know what rule is gonna change, what new pointless law will be passed, what bailout will fail next… People aren’t going to dig in and charge forward if there standing on a marshmallow and rubber band floor… Businesses don’t want to make commitments cause fuel costs are again on the rise which are causing suppliers and consumers alike to continually change there strategies and plans… National debt is out of control… All the so called leadership is a joke where everyone just points fingers at one another…. The public is so frightened of what could lay ahead that focus has shifted on prepping for an end as we currently know it instead of working towards a “better life” so to speak… People are buying guns, food, gold and silver, bunkers… There not going on long vacations anymore with that money… The ones who are vacationing and buyin cars and “toys”  are likely the ones who will be royally screwed when it’s game, set, match… Yes debt is lingering… But people are scared and some are doing something about it…

  2. There isn’t a main line country in the world that does not have excessive debt.  Almost all have debt, present and accrued through promises for the future, well in excess of a debt to GDP of 1 to 1.  The US is 5 to 1, UK  10 to 1, Japan 2.5 to 1,  France 2 to 1, Spain 2.2 to 1.  All will be completely unable to pay these debts or future obligations.  The rolling bankruptcies of these countries will not stop for at least a decade or more.

  3. It absolutely felt good to vent… As with most of us there is still much anger over the current state of things… Why are we angry? Cause this all could have been avoided… Most of it anyway…

  4. Lauren,

    Marry me! I just had an intellectual orgasm listening to her explain the debt problem on her opening monologue. A gorgeous woman who understands the economy….what more could a man want!
    Sorry, it’s been a while. LOL
  5. I’m not a fan of “Mish”, who believes that governments can literally create hundreds of trillions of virtual assets without affecting upwardly affecting the prices of real ones.  Yet, this piece is true, the debt(or malinvestment, as Austrians say) must be liquidated.  Either completely default, or allow governments to meet in courts with previous creditors and settle on the losses and monies to be repaid…..the right way.

    No recovery is forthcoming until this happens, and this can’t happen until the banks are taken down.

  6. Love this young lady, reminds me of my daughter with more brains. I even watch RT TV now because of these posts thanks to Doc.

    Love it “Their Missing So Many Points I Don’t Know Where To Start ” LMAO Meaning our so called economists.

    Keep Stacking Folks it’s getting near. The Fed, Mission Impossible and so is Krugman. LMAO

    One of the better interviews, learned a lot.

    LMAO Thanks for venting Dano, I  LMAO

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