Sudden Debt Redux: Where Are We Now?

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Sudden Debt Redux: Where Are We Now?

http://suddendebt.blogspot.com/2011/08/sudden-debt-redux-where-are-we-now.html

Sudden Debt was started five years ago warning of excess in debt, asset bubbles and the end of the "Permagrowth" model. Today, some of the most egregious excesses have been reversed or at least arrested after wrenching and painful adjustments to the real economy.

Here are some relevant charts (all apply to the United States).

Total debt as a percentage of GDP is still extremely high, but at least it has stopped growing.

The debt service ratio has come down significantly, mostly through rock-bottom interest rates engineered by the Fed.

The personal saving rate is rising, even if only slowly.

Residential real estate, the biggest bubble of them all and Mr. Greenspan's biggest mistake, has burst spectacularly.

The charts above tell me, at least, that the Permagrowth model of the US (and global) economy is finished and must be replaced with something entirely new. I simply cannot imagine that we will just roll over and once again start pumping the same old bubbles of consumption, debt and real estate as remedies for "low growth". History teaches us that it can't be done: once a bubble is burst it stays burst for a long, long time and any attempts to re-inflate it ends in wasted time and resources (Just look at Japan..).

(more at link plus lots of charts)

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Enjoy