SOS Faith Vs Fact

What types of IOUs/Debts created over the last 10 years?

1. Conventional type

2. Derivatives type

How much IOUs/Debts created over the last 10 years?

1. About 40-50 trillion

What will happen when they become non-performing?

1. Credit by banks will disappear for a long while

What will happen if credit disappear?

1. Banks cannot give new loans

2. Non financial banks giving mortgages will collapse

3. Smaller banks with commercial mortgages will collapse

4. Banks become weaker or goes belly up

Are the financial institutions/non financial lenders add value to the economy?

1. Not much, merely act as intermediary for capital

Is the US over consumed?

1. Yes because they spend more than they earn. i.e. negative savings over many years until lately

What will happen if over consumed?

1. Starts saving, reduce consumption

What will happen to economy then?

1. economy will slow down after the stimulus fizzle out

MyView

From the deduction above, you will realise the debt level is unprecedented, i.e. 360% of US GDP. Only one way out, debt will become uncollectable, people will start savings, bank will stop giving new credits, people will consume less.

In short, social mood will be NEGATIVE. Hence, most assets bubble class will burst, i.e. Stocks, Bonds, Commodities