I owe he as you owe me and you owe he and we all owe together. (Apologies to Lennon/McCartney and I Am the Walrus.)
It's the debt, stupid. With the U. S. and other countries such as Australia and I believe the U. K. at record levels of debt to GDP, the web of who owes what to whom is more and more complex, and using a different metaphor, the ladder of debt is higher and less well-supported. All the "extend and pretend" accounting schemes have delayed recognition of the problems of the banks, and the stock charts of every large bank in the U. S. show weak long-term charts, even JPM. Past may not be prologue, but the charts of the top tech and medical companies show long-term accumulation.
And count me skeptical that China's any better.
Our government has done exactly the wrong thing by dealing with the housing collapse by guaranteeing more low-downpayment loans. At least the large complex financial institutions have sold stock, and while Citi and probably BofA are truly impaired, at least they have repaid TARP by selling equity rather than borrowing.
Anyone who is not in power in Washington who predicts on the record whether inflating prices or deflating prices are to come in 2010 is pretending. There are too many known unknowns and possibly unknown unknowns to even guess. Increasing economic activity is baked in the cake and baked in the markets for the next 6 months; but could even the modest tax increases that likely would come with healthcare "reform" legislation plus the expectation of the 2011 expiry of the Bush tax cuts derail the recovery just as a tax increase in Japan about a decade ago was said to have helped turn the economy down? Or could economic vigor in the BRIC countries pressure the price of oil enough that our economy turns down even without any monetary or fiscal tightening? Or will the economy just sail along given all the pro-cyclical stimulus, and perhaps China's property situation will turn into a burst bubble.
It smells like an interesting year.
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