Reinhart on the weight of debt deleveraging cycles

Carmen Reinhart, co-author of the book This Time Is Different: Eight Centuries of Financial Folly and a professor at Harvard, talks about U.S. deficit reduction, Federal Reserve policy and tax code reform. Here is a direct link. She points out that while Fed policy may well continue lax for several more years, it is unlikely to change the slower growth trajectory of our debt deleveraging cycle.

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2 Responses to Reinhart on the weight of debt deleveraging cycles

  1. aliencaffeine says:

    I read an article by Reinhart and Rogoff that basically said the recovery was going to be a very long, slow slog so the current market upswoop must be looked at as ‘too much, too soon’.

    Trade at your own risk. The hour is growing late and the boomers want their meal.

  2. mommybomm says:

    Great post! There was an article in Money-April 2011 with Carmen Reinhart which is still spot on–not much has changed. In the article she speaks as does Danielle. The process is painful and slow. Financials mired in non-perfoming loans, businesses okay because they weren’t levered up like crazy, households still mired in a lot of debt related to the real estate bubble. Financial Repression ala Fed which needs to keep rates very low for a very long time. But unlike WWII paid-off debt, which we knew how much it was going to cost, the looming Boomer retirement/Medicare is not known and FISCAL AUSTERITY measures are sure to come and a shift toward ‘heavy-handed regulation’. Belt-tightening has to come, including the entitlements. Taxes and retirement age to go up. State and local governments in the US are hurting. Expect defaults by cities–states will be saved by a fearful Fed. Pretty tough stuff.

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