How to Deleverage the Most Leveraged Economy in History
What we have now is deflation by definition -- and we may lose a decade or two.
Inquiring minds are reading a Comstock Special Report on Deleveraging the US Economy.
"We could wind up with a lost couple of decades just as Japan experienced over the past 20 years.
"We, however, don't believe that the US massive stimulus programs and money printing can solve a problem of excess debt generation that resulted from greed and living way beyond our means. If this were the answer Argentina would be one of the most prosperous countries in the world. This excess debt actually resulted from the same money printing and easy money that we are now using to alleviate the pain.
"...The total debt grew to over $52 trillion relative to our current GDP of approximately $14 trillion. ...Even if you took the debt to GDP when the US entered the secular bear market in early 2000 and compared that to 1929 and Japan in late 1989, our debt to GDP still exceeded both (by a substantial margin relative to 1929). The approximate numbers at that time were about 275% in the US in early 2000, 190% in 1929, and about 270% in Japan in 1989.
"...We expect that the US deleveraging will follow along the path of Japan for years as real estate continues to decline and the deleveraging extracts a significant toll from any growth the economy might experience. We also expect that, just like Japan, the stock market will also be sluggish to down during the next few years as the most leveraged economy in history unwinds the debt."
Is Deleveraging a Positive or Negative Thing?
Comstock's opening gambit was:
"Many investors look at this deleveraging as a positive for the United States. We, on the other hand, look at this deleveraging as a major negative that will weigh on the economy for years to come and we could wind up with a lost couple of decades just as Japan experienced over the past 20 years."
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