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A Double-dip Recession Is Coming: Here Are Three Reasons Why


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HOLA441
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HOLA442
A good read. I will paraphrase - we're fecked.

http://www.moneyweek.com/news-and-charts/e...sion-93805.aspx

"There's still plenty of dodgy debt on the banks' balance sheets

There are at least three good reasons to be concerned that this economic rebound won't last. For one thing, all that dodgy debt that was on the banks' balance sheets hasn't gone away. Plenty of it is still sitting with the banks themselves. That's one of the main reasons that – despite all the money pumping by the central banks – the money supply is plunging in the US.

As Ambrose Evans-Pritchard notes in The Telegraph this morning, US bank lending fell at an annual rate of around 14% in the three months to August. Professor Tim Congdon of International Monetary Research tells him: "There has been nothing like this in the USA since the 1930s." And we all know what happened then.

Banks are scared that a) regulators will force them to hold more capital (in other words, to have more of a cushion against future losses) and B) that rising bad debts will put them back in a position where they have to return to shareholders or governments for more handouts. Therefore, quite sensibly, they're not as keen to lend as they once were.

When credit availability is shrinking, debt-dependent economies have a hard time growing. Now, we'd argue that sometimes economies that have overstretched themselves need to take the time out to lick their wounds, heal their balance sheets, and unravel all the bad investments that were made during the boom times. But that involves a fair bit of pain, something which governments in particular want to avoid, as voters don't like it."

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