Why Bears Always Have the Best Arguments, Part II
Jim Grant does a nice job in the weekend NY Times showing why bears are so darn compelling. His column on the coming recession, and the U.S. debt load, is compelling, empirical, and, yes, lyrical, like an unholy offspring of Paul Krugman and Mark Helprin. It is a lovely read that still makes me want to hide under the bed.
1[Recessions] allow the sorting out of boomtime error. They permit — indeed, force — the repricing of inflated assets. In a downturn, previously overpriced businesses, houses and buildings are made affordable again.
Naturally, people hate these painful, salutary interludes. Nobody likes insecurity, bankruptcy and joblessness. So the Fed keeps slashing interest rates. And this balm does mitigate the suffering. Homeowners and businesses refinance their debts. Fewer houses are thrown on an overstocked market.
Observe, however, that the great preceding illusion is undispelled. Prices have not come down as they should have. Neither has indebtedness. The architecture of the economy remains as it was. Land, labor and capital are still structured for an imagined glittering future.
Presently, a new upcycle does begin, but it’s slow off the mark. The world’s top economy seems curiously sluggish. And the economists and politicians ask, “What happened to America’s dynamic economy?” The answer: It’s wrapped in the coils of debt.
