langreiter.com plain, simple: 2008-10-12-debtology

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2008-10-12-debtology

CREATED BY chris • LAST EDITED BY chris 5868 days AGO

John Walker: "And so, it's all about the debt: a collapsing bubble built upon debt created based on asset values inflated by earlier debt, and around and around we go, until the music stops. Music? I don't hear it any more. We're looking, as we did in the 1930s, at the liquidation of a massive stock of debt, unprecedented in its size in human history, which any dispassionate observer would immediately conclude cannot be repaid, or if repaid, only at a steep discount to its face value. This deleveraging (another term you may have first encountered here, but you're sure to hear innumerable times in the legacy media chatter in the next several months) is just in its early stages at present. Any number of things could have triggered it: in this case it was the subprime mortgage collapse, but it could equally have been a run on the dollar, a Chinese move out of U.S. Treasury securities, OPEC repricing oil in Euros, or any number of other proximate causes."

'Note that "bailouts" as presently proposed and implemented make no difference whatsoever in this chart. They're just a transfer of debt from the private account to the public account. While this may make a big difference to creditors of the rescued companies and to the taxpayers put on the hook to assume the consequences of speculative mismanagement, it doesn't make a whit of difference to the aggregated debt picture: somebody's going to have to pay back that Mount Everest of debt, or else default on it, or (the way to bet, once it's assumed by the government) inflate it away.'