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« The Debate about Gold: Be Wary | Main | ETF Update: Investing in India »

December 24, 2009



Thanks, Paul!

Happy New Year to you, and to other loyal readers:)


Paul Nunes

Excellent Jeff. I've really enjoyed my time on your blog this year!



Mike -- Thanks for another strong and helpful comment.

When writing these year-ahead pieces it is always a challenge to focus on your own ideas rather than refuting others.

You have a valid point. I should write something more on what I mean by "normal and sensible lending." I think I did some RealMoney pieces on this, but perhaps not on the blog. Mostly I mean a resumption of normal commercial paper, home lending, business lending, student loans, and even resumption of securitization. Debt and equity are alternative choices for business in normal economic times, and public policy is aimed at restoring this.

As a general observation, let me note a few points. Looking at debt alone is considering only one side of a balance sheet. Any analysis should also consider assets. The debt should be compared to the ability to repay, and should link the specific debt to the specific payer. Finally, it is deceptive to make these comparisons at the bottom of a cycle.

An investment in human capital, a student loan for example, makes a lot of sense in this employment environment, but shows up badly in some charts.

I do not want to launch into a detailed critique of the site you named, but I suggest that you use your own critical skills. These anonymous guys have something to sell and present a one-sided viewpoint about debt.

I'll put a more detailed look on what I see as "normal" as part of the ever-growing blog agenda.



Mike C

Merry Christmas Jeff,

In the Q&A you state, "The most important lesson of 2008 is very specific. We learned what happens when you get a complete cessation of lending in an economy that depends upon normal and sensible borrowing for regular commerce."

Can you quantify that? In your view, what magnitude of ongoing credit issuance and overall debt level constitutes "normal and sensible borrowing"?

I would point you towards this piece for context:

Obviously, debt levels have varied substantially over the decades since 1950 to present. Was 1950-1960 normal and sensible borrowing or the last 10 years?

Do we have many years of deleveraging ahead of us, or can debt levels stabilize at the current value?

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