Doug Noland: “The Situation Is Utterly Hopeless”

One of the notable things about Doug Nolan’s weekly PrudentBear Credit Bubble Bulletin is his measured language. Noland will, like a lot of commentators these days, say apocalyptic things, but he usually makes his points with data rather than hyperbole.

But this Friday’s Bulletin is more emphatic than usual, which could be a sign that Noland sees the edge of the cliff approaching. An excerpt follows. The full article is here.

It’s been my long-held view that, in the grand scheme of major Credit busts, calculations of necessary additions to depleted bank capital basically become meaningless. The critical issue is not some quantifiable (and “plugable”) hole in banking system capital but, instead, the overall Credit needs of maladjusted Bubble economic structures and inflated system-wide prices levels and spending patterns. This is a critical distinction. In the U.S., for example, I have argued that a period of prolonged Credit excess created a financial and economic structure requiring in the neighborhood of $2.0 TN annual net non-financial Credit growth – to keep the economic wheels rotating and (speculative) asset markets levitating. Post-2008 crisis bailouts threw hundreds of billions (Trillions?) at the financial sector, although this changed little with respect to the economy’s requirement of massive Credit creation on an ongoing annual basis. This is an enormous festering problem that goes unnoticed with attention fixated on European carnage.

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via Doug Noland: “The Situation Is Utterly Hopeless” —


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