More on Debt

There’s a good post by Daniel Alpert that you may notice supports several themes I’ve discussed around here. This quote jumped out at me:

Debt deflation is debt deflation, wherever the debt resides. Growth suffers either way. Adding the excess supply and productive capacity of the 3.5 billion people in the emerging markets overwhelmed aggregate global demand even before the developed world over-leveraged itself.

that is whether in household debt (the U. S.), public debt (Europe), or corporations (Japan).

Here’s another snippet:

We have long been unable – despite valiant efforts to make our currency unattractive (ZIRP, QE, etc.) – to devalue the dollar in order to re-inflate the economy. Our trading partners simply won’t let us in an environment of excess supply – everyone can’t devalue at once – and the curse of being the world’s reserve currency is that the dollar is also the flight currency in times of weakness. Protectionist measures – once again being grasped at by otherwise well-intentioned but desperate minds – are more frightening to the market than almost any other solution.

In my view the real solution to our problem is to get China and India to open the floodgates of their own domestic demand. There’s lots of stuff that the Chinese and Indians want and the Chinese, in particular, have lots of foreign exchange gathering dust in musty old publicly-owned banks to spend. I think that the Powers That Be are afraid that China and India will pick up their marbles and go home. And do what, exactly? The Chinese and Indians have more at stake than we do in globalization.

Bottom line of the post: fasten your seat belts, we’re in for a bumpy ride.