http://market-ticker.denninger.net/uploads/Dec2009/credit-all.png
Strangely enough, the federal government has, over the last year -
1) transferred to the treasury an immense amount of bad debt off the books of the banks, clearing the way for them to leverage more bad debt.
2) changed reporting rules making it easier for banks to hide bad debt on their books.
3) produced numerous consumer spending initiatives promoting increased consumer and federal debt.
4) transferred to the treasury household mortgage debt consumers couldn't pay off.
Moving forward, the current administration is planning on adding additional federal spending on healthcare (a transfer of cost of living from consumers to the treasury) and is considering legislation that will slow business growth (cap and trade).
Debt doesn't magically disappear, you can shift it around but it doesn't go away. Adding to that debt just pours more fuel on the fire.
Can someone help explain what the heck is going on?
