Unwinding Massive Debt

Credit deflation is being dissected and understood.  Here comes a brilliant expose by David Stockman -

 Stated differently, the Fed’s fundamental tool of open market purchases of public debt and other securities, and thereby the expansion of its balance sheet, embodies the exchange of claims based on something for credits made from nothing.
The Fed’s current $4.5 trillion balance sheet, in fact, could be expanded to sport liabilities of $10 trillion or even $100 trillion by a few keystrokes on the Fed’s computers—–if the open market desk could find enough public debt, private debt, equities and even seashells to buy and stash on the asset side.

If we won't spend it, they will spend it in our name! Stockman goes on to explain how we got here. All this distortion must be undone, but of course there is no political will to do what is right. Let's just look at a visual, and read Dr. Gary North's take on the article.... credit growth black line, real GDP red line:



There is no rational limit to lending credit.  But there is a irrational limit, meaning it will crash, when, no one knows.

NB: CAGR = Compound Annual Growth Rate

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