...of the over $600 billion in deleveraging, only $20 billion or so of it was voluntary, with the balance occurring due to continuously irresponsible borrowing practices, in which US consumers spend, spend, spend themselves into oblivion only to be cut off cold turkey, instead of entering a slow deleveraging rehabilitation which would allow them to shift into the transition to a new creditless normal far easier.
The last observation is key as it has rather startling implications to David Rosenberg's theme of the New Frugal Normal. It would appear consumers do not, in fact, moderate their spending while still in possession of credit (regardless of its cost) - quite the contrary: they accelerate spending until the charge off threshold at the lender is breached, and all credit is cut off, also resulting in a collapse in a creditor's FICO score, cutting him or her off completely from future (at least near term) credit access. Thus what is occurring at the end of a typical consumer credit lifespan, is not a whimper but a massive bang....
And with unemployment still at record highs, and soon to take another leg higher, paychecks continuing to decline, excess capacity at record highs, 99 week EUC and Extended Claims reaching their ceiling 2 year anniversary from the Lehman collapse, and the general economy double dipping, the implications of this will be dire, as there will be no gradual decline.---Zerohedge.
Point well made, if it stands to further (someone else"s) verification.
But - How does this disagree with Rosenberg, or invalidate much of what he says? True - many people will crash and burn dramatically. It's a tragedy which will take a generation to fix. Many are also de-leveraging (yours truly). I do very semi-agree with ZH's rant to the extent that Rosenberg for all his pessimism assumes with some blitheness that all the traditional market and economic forces will keep on keeping on, just at a different level. I'm more Armageddonist but only in a Rumsfeldian sense - I believe we still have unknown unknowns out there which will visit yet more grievous devastation. sigh.
But - I think Rosenberg has it more right than the Armageddonist class. For example, gold is good because everyone is and will be economically uncertain for good reasons for a long time, not because the world is ending. The US will not implode, and so treasuries are, for now, a safe-ish bet. Etc
ZH ends the rant with a strange conclusion: ".. instead of the US economy decelerating at a rate proportional to the removal of credit from the system, it will grow and grow until it hits supergiant status, only to collapse into a neutron star (or worse) singularity..."
Did not ZH just say the economy is double-dipping? If so, how can it grow and grow to be an unstable supergiant?
Stick to the facts, ma'm.