Ignore the political storms of the moment. The best financial description I've heard of our current economic malaise is calling it a "balance sheet recession". Or to put it another way, all the private players in the American economy (and a lot of the rest of the world) were over-leveraged going into 2007. And now all the private players are de-leveraging (or reducing debt).
I remember predicting to a friend in early 2008 that it would be 2012 before we started to climb out and 2017 before we are back to the historic norms. Unfortunately, my prediction seems to be close enough.
Take a look at this article in Pragmatic Capitalism by Jan Hatzius where he goes into the details. In the long run, the news is good. In the short run, there's more pain ahead and more political shenanigans by our ruling class can be expected.
Thursday, November 15, 2012
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