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Evidence of the “Credit Crunch”
In my mail this morning is the latest report from one of my favorite economists, Marc Faber, who writes monthly reports which may be found at his site: www.gloomboomdoom.com. In it he refers to a chart which I want to discuss further.
If one is to understand the breadth and depth of the current credit crisis, one must read widely. It also is necessary to ignore the “happy talk” put out by the federal government. One chart prepared by Bridgewater Associates reveals that new credit creation as a percentage of GDP is lower now than at any time since before January 1995. In thinking about that for a moment, that means that there is less debt in the system than in the aftermath of 9-11 or again, at any time in the last 13 years. It may be a longer amount of time, but the chart only goes back to January of 1995 when there was more debt than at the present time.
Again, this is simply more evidence of the credit crisis now enveloping the US. It is also interesting to note that the Federal Reserve has come up with guidelines to restrict lending of the type which allegedly got the mess started, however, the banks and lending institutions have already tightened their lending practices, so more regulation is probably unneeded anyway.
Michael
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