American Total Debt Bubble Threatens GDP

Barrons magazine annual Roundtable discussion of 2010

Barron's magazine printed the first part of its annual Roundtable discussion of 2010 this past week. We noticed that many of the participants were very concerned about the debt (mostly government debt while we think total debt is a much more useful metric). Marc Faber, in fact, talked about a 7,000 word New York Times article by Professor Paul Krugman. He stated that the article "How Did Economists Get It So Wrong?" never mentioned that excessive credit growth or leverage was the cause of monetary instability and brought about the financial crisis. Bill Gross stated that by lowering interest rates we promote consumption instead of manufacturing. Central bankers were forced to respond with liquidity to a problem that developed over the past 25 years. There was more discussion of credit growth (another way to say debt growth) in the macro analysis that is always presented in the first part of the three Barron's articles of the Roundtable. The amazing thing to us is that most of the roundtable participants understand the same problems we talk about almost every single week, yet are mostly very positive on the market for 2010.
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