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| Forums -> Longwaves Forum -> There''s a Bull Market Somewhere? |
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Yet a 10% aggregate asset price decline
does more than make us all 10% less wealthy. Because many of these assets are
leveraged and margined, the more they decline, the more frequent and frenzied
the margin calls, and if the additional cash flow is not provided, not only an
asset liquidation but a debt liquidation follows. It is the debt liquidation
that potentially turns a stagnant/recessionary economy into something much
worse
This rarely observed systematic debt liquidation
is what confronts the U.S. and perhaps even the global financial system at the
current time. Unchecked, it can turn a campfire into a forest fire, a mild asset
bear market into a destructive financial tsunami. Central bankers, of course,
adopting the cloak and demeanor of firefighters or perhaps lifeguards, have been
hard at work over the past 12 months to contain the damage.
You see we need more credit to stop the
credit destruction, that makes total sense.
Joseph
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