Scary Chart: US Private Debt to GDP

The US Private Debt to GDP chart is one that concerns me, it spells ‘deleveraging for many years’ in big bold letters. You don’t need much more than this to get the picture. With households so heavily indebted – and consumer spending being the driver of the US economy, it is now wonder that QE2 and whatever else they try is to be expected.

The trajectory of the chart after major financial crashes (remember this is the ‘worst since the great depression’), has a clear path, and for that reason it is likely that we’ll see deleveraging continue on the downward trendline you can see forming above.

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New trends in underwriting and credit

It is 2009 and one of the things we need to look at (at least from the mortgage market perspective) is the availability of credit. Many associations such as ISME and politicians such as Joan Burton have voiced strong opinion on the need for credit to be extended to small businesses. The same credit contraction is happening in lending for property.

While our firm, and almost everybody involved in the mortgage market accept that we are not at market clearing levels, the unavailability of credit for those who do wish to buy and are capable repaying their loans is going to cause an unnecessary distortion which will drive prices down further than is rational. Without getting too deeply into the reason for the credit contraction/deleveraging process which we have covered many times here before, the point of interest is the new brand of underwriting we are likely to see.

In the past people within the financial industry were looked upon favourably, not only due to the fact that they normally represented a …

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Currency markets Q4 of 2008

In the last few weeks we have seen some of the most volatile currency markets in history. Iceland (Króna) as a nation basically went bankrupt, there are serious currency risks in Hungary (the Forint), the Ukraine (the Hryvnia) and several other countries.

The downside is that this may be the prelude to a currency crisis not unlike that which we saw in Asia in the late 90’s. The move has been playing out in the markets at a time when most of us are concentrating on the Credit Crunch/Liquidity Crisis. The dollar was as low as $1.60 to the Euro and $2.10 to Sterling, then it snapped back to $1.25 and $1.60 respectively.

The Australian and Kiwi Dollars both got hammered, Iceland was next in line then the South African Rand and Polish Zloty took a beating. The South Korean Won and then the Hungarian Forint suffered, the Czech Republic Koruna is facing issues and the Mexican Peso is …

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