Interesting Articles On Credit Expansion And Liquidity

Another interesting article about deflation, this time caused by excess global liquidity.

But, for now, a superabundance of money and credit is financing a leap in asset prices across markets and time zones. Colleague Ian McCulley has made a study of this transnational and heterogeneous bull market. The most favored asset classes run the gamut: comic books, Spanish postage stamps, U.S. farmland, Indian paintings, exotic automobiles, Middle Eastern antiquities, Middle Eastern equities, European houses, Tokyo land. Taking a bow for a stellar second quarter, Sotheby’s cited strength in the Chinese art market, the Russian art market and in Impressionist and contemporary art sales in London. It has pushed through a 22% increase in commission rates.

Also got an email today also talking about credit expansion.

“It’s time,” Addison reports from on the scene in Cannes, France. “The good doctor poked me in the shoulder last night at dinner. ‘It’s time for the United States to collapse,’ he said, with a satisfied smile on his face. ‘The world needs to heal.'”

In a normal economic expansion, Dr. Richebächer contends, credit expansion is roughly equal to the nation’s savings. As 2005 was the first full year in which the U.S. consumer saw a negative savings rate since 1933, the rate of credit expansion should have also been negative.

Au contraire, Dr. Richebächer estimates that for every dollar of GDP produced in the United States last year, over four dollars of credit was created. “We haven’t seen such a bubble as this one since the 1920s. The only difference is…this time it’s much worse,” says the good doctor.

If you want to read why Dr. Kurt Richebächer thinks the US is headed for a slump you can read the whole article By Far the Weakest Recovery

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