Words and Numbers, Numbers and Words

First, please view this chart, which is one of many accompanying a Comstock Report appropriately entitled Deleveraging the U.S. Economy. As I mentioned, there are many useful charts in this very technical article, but the one displaying Total Credit Market Debt in relation to GDP is cold, harsh, and illuminating.

The authors conclude that the American deleveraging process will be much like the Japanese experience- which should make us all tremble (with the exception of the ignorant or truly rich).  Unfortunately, it is nearly impossible to imagine an alternate scenario than the American savings rate slowly, tortuously, rising back to a more sane 10% by say 2018.  The unfortunate part of that prediction is that for an economy precariously reliant on the heady steroids of debt, going clean will be a difficult adjustment indeed.  In fact, the patient is already beginning the arduous recovery from overdose and near death due almost exclusively to the tireless Government owned/sanctioned money presses.  Of course, this is merely trading one imbalance for another, akin to switching from heroin to methadone.  A former junkie can survive for years on a regimen of the latter, but the quality of that life is at least questionable.

While the Government may have saved the patient from dying on the operating room table, it unwisely declined to proceed with any significant surgery.  The fundamental structure of the U.S. economy, and certainly that of its cancerous financial sector, remains essentially untreated.  I for one have little to no faith in the current leaders of our political establishment, thus the longer term prognosis is grim.  As they say in Japan: “Ganbatte, Ne!”.