Concentrated at the Low End..indeed
Mike Whitney..excerpted…and on point… The binge (druggy like horseshit high times caused by consumer debt…leading to x-y-z….hone in on consumer debt as dark catalyst for worsening times to come….. there will be no recovery till this cannabalistic variety show (neo-bio-peo-Capitalism.. is OUTLAWED by US…that is….regular dudes and gals….) 4-10-09
As housing prices fall and foreclosures rise, the capital position of many of the banks will become untenable leading to a rash of bank failures. An article in Monday’s Wall Street Journal puts adds some historical perspective to today’s financial crisis:
“The events of the past 10 years have an eerie similarity to the period leading up to the Great Depression. Total mortgage debt outstanding increased from $9.35 billion in 1920 to $29.44 billion in 1929. In 1920, residential mortgage debt was 10.2 per cent of household wealth; by 1929, it was 27.2 per cent of household wealth….
The causes of the Great Depression need more study, but the claims that losses on stock-market speculation and a monetary contraction caused the decline of the banking system both seem inadequate. It appears that both the Great Depression and the current crisis had their origins in excessive consumer debt — especially mortgage debt — that was transmitted into the financial sector during a sharp downturn.
Why does one crash cause minimal damage to the financial system, so that the economy can pick itself up quickly, while another crash leaves a devastated financial sector in the wreckage? The hypothesis we propose is that a financial crisis that originates in consumer debt, especially consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system. It appears that we’re witnessing the second great consumer debt crash, the end of a massive consumption binge.” (From Bubble to Depression? Steven Gjerstad and Vernon L. Smith, Wall Street Journal)
