Due to sanctions instead of rolling over their debt like everyone else does Russian companies are forced to repay it. Also means that unlike everyone else they're going to have very little debt.
...330% is still a massive number and one has to look not just at the absolute levels of private sector debt but the nature of that debt. It is beginning to resemble 2007 all over again. Despite Fed jaw boning, the growth of overall corporate credit and, in particular, junk credit has increased. Here is a chart of leveraged loan growth through the end of last year;....Macrobits by Marshall Auerback
As Norris noted, the bubble wealth is gone, but the debt remains (still high on a historical basis). This was especially hard on younger households since they bought during the housing bubble.Calculated Risk
The spin-doctors are hard at work talking up America’s subpar economic recovery. All eyes are on households. Thanks to falling unemployment, rising home values, and record stock prices, an emerging consensus of forecasters, market participants, and policymakers has now concluded that the American consumer is finally back.
Don’t believe it. First, consider the facts: Over the 21 quarters since the beginning of 2008, real (inflation-adjusted) personal consumption has risen at an average annual rate of just 0.9%. That is by far the most protracted period of weakness in real US consumer demand since the end of World War II – and a massive slowdown from the pre-crisis pace of 3.6% annual real consumption growth from 1996 to 2007.
With household consumption accounting for about 70% of the US economy, that 2.7-percentage-point gap between pre-crisis and post-crisis trends has been enough to knock 1.9 percentage points off the post-crisis trend in real GDP growth. Look no further for the cause of unacceptably high US unemployment....Project Syndicate
Last week, the Federal Reserve issued the Flow of Funds report, which provides a good overview of the underlying financial situation in the US. Here are a few charts to highlight some trends.Bonddad
The shift to negative net savings in the household sector is supposed to be bullish for the U.S. economy. The implication is that at the end of 2012, households finally started borrowing again – spending again – as opposed to paying off past debts.
Koo, however, suggests that observers are missing the details, which paint a much bleaker picture
In fact, according to Koo, the way in which the household sector shifted to net negative savings at the end of 2012 has only been observed twice before in recent memory. The first time was following the collapse of the internet bubble in 2000, and the second time was following the collapse of Lehman Brothers in 2008.Business Insider
While Koo-nesianism is only one ideological branch removed from Keynesianism, Nomura's Richard Koo's diagnosis of the crisis the advanced economies of the world faces has been spot on. We have discussed the concept of the balance sheet recession many times and this three-and-a-half minute clip from Bloomberg TV provides the most succinct explanation of not just how we got here but why the Fed is now impotent (which may come as a surprise to those buying stocks) and why it is the fiscal cliff that everyone should be worried about. As Koo notes, the US "is beginning to look more like Japan... going through the same process that Japan went through 15 years earlier." The Japanese experience made it clear that when the private sector is minimizing debt (or deleveraging) with very low interest rates, there is little that monetary policy can do.The government cannot tell the private sector don't repay your balance sheets because private sector must repair its balance sheets. In Koo's words: "the only thing the government can do is to spend the money that the private sector has saved and put that back into the income stream" - which (rightly or wrongly) places the US economy in the hands of the US Congress (and makes the Fed irrelevant).Zero Hedge
In a Daily Ticker Interview with Henry Blodget, economist Gary Shilling makes the case the US is already in recession.MISH'S Global Economic Trend Analysis
QE1 worked because it was in the midst of wrenching crisis. QE2 failed, despite what the Fed’s research shows. Twist 1 has failed. Twist 2 is failing. When 70% of the economy is in a balance sheet recession and the growth rate for 18 quarters in row has been at less than 1% at an average annual rate, consumers are telling you something. They want to pay down debt and rebuild saving and all of the monetary stimulus in the world is not going to change what is a perfectly rational response. So the idea that the Fed is going to step in and save the day, it has not worked in the past except during the depths of the crisis and i give them credit for that.Read it at Credit Writedowns
Robert Shiller of the famed Case-Shiller Index came out only a few days ago stating that housing may not recover for over a decade. As dire as this may sound, we have a similar example to look at in Japan. It wasn’t like he stated this just to cause a stir but talked about compressed household wages, record low mortgage rates, and a large pipeline of distressed inventory. Even though real estate values are now down 35 percent from their peak taking values back to 2002 (a lost decade) we would need to increase housing values nationwide by 50+ percent to get back to the peak. This is what he was discussing about home values not recovering to that price point. Japan has had well over two decades of a depressed real estate market and values today still do not approach the peak values reached in the early 1990s in spite of their central bank pushing rates even lower than theFederal Reserve. In fact, prices are holding closer to the trough. Examining the data we already find ourselves into one lost decade. Is another possible?Read the rest at Dr. Housing Bubble
Dalio's article, "An In-Depth Look at Deleveragings" is apparently authored by him. It concludes that the best way to "deleverage" is a "proper" combination of debt reduction (defaults and restructurings) and debt monetization (monetary inflation). This is what he considers to be a "beautiful" deleveraging whereas deleveraging by debt reduction and austerity are "ugly." The ugly ones cause recessions/depressions and deflation which is bad. Beautiful deleveragings minimize debt reduction and revive economies with monetary stimulation....
Dalio defines a beautiful deleveraging as one "in which enough 'printing' occurred to balance the deflationary forces of debt reduction and austerity in a manner in which there is positive growth, a falling debt/income ratio and nominal GDP growth above nominal interest rates....
What he calls "ugly", an austerity and debt reduction, is actually "beautiful". While it is painful, it is painful for a much shorter period of time and enables the "economy", i.e., people, to go bankrupt, repair their finances, start saving again, create new capital, and then create new economic growth and jobs. By preventing or delaying this process the policy makers only doom us to economic stagnation, inflation, and permanent high unemployment. And I fear that is exactly where we are headed.Read it at Zero Hedge
The White House also looks to be on team balance sheet....
When Noam Scheiber wrote about how the administration viewed the economy in late 2010, he explicitly contrasted its wonks’ opinions with that of the balance sheet recession theorist Richard Koo. So is this a revolution within the administration? Is this why it is now pushing for writedowns and refinancing, after having left housing on the side for the past three years? Let’s hope so, since I consider being three years late to the party better than never showing up.Read it at Rortybomb
