In the original article here, Another Economic Theory Shot All to Hell, it was shown in a graphic the countries with the highest levels of household debt were often Scandinavian and they're strongly socialist. The countries with the lowest levels of household debt were often eastern European (i.e. previously Soviet). The ones in the middle and the Big Dawgs of manufacturing were Germany, US, France and, surprisingly, not so much more in debt was Greece.
Cadillac Man offered the New and Improved Theory in which he suggests the reason we see the breakouts like that are indicative of how much capital is available. In other words, people will not or cannot borrow money when there is none to borrow. That's likely the situation with the ex-Communist nations and their incipient capitalist economies.
The socialist countries with the highest household debt are also economies which do quite well and the people enjoy a high standard of living. Capital is available and their confidence in their economies is high so, wtf, they borrow and they spend. The telling factor isn't so much the level of debt but rather whether it ever gets repaid.
In the middle we have countries which are troubled and confidence is low with the thinking no matter what happens in the election we will still be fucked. Buying is not as high in a situation like that because there's too much uncertainty.
The New and Improved Theory actually vindicates the socialist model and that should hold unless it can be shown there's an astronomical number of concomitant bankruptcies indicating people are borrowing money they can't pay back.
Thanks to Cadillac Man for this insight as it does seem to balance. It was a great one.
Ed: does this mean a snipe hunt for a chart which shows bankruptcies by country?
Prob'ly so but not just now. Just now the Silas will find some horizontalism.
(Time passes)
Here's a chart on bankruptcies by country but good luck making sense of it and trying to integrate it with the existing chart for household debt.
Trading Economics: Bankruptcies
Cadillac Man offered the New and Improved Theory in which he suggests the reason we see the breakouts like that are indicative of how much capital is available. In other words, people will not or cannot borrow money when there is none to borrow. That's likely the situation with the ex-Communist nations and their incipient capitalist economies.
The socialist countries with the highest household debt are also economies which do quite well and the people enjoy a high standard of living. Capital is available and their confidence in their economies is high so, wtf, they borrow and they spend. The telling factor isn't so much the level of debt but rather whether it ever gets repaid.
In the middle we have countries which are troubled and confidence is low with the thinking no matter what happens in the election we will still be fucked. Buying is not as high in a situation like that because there's too much uncertainty.
The New and Improved Theory actually vindicates the socialist model and that should hold unless it can be shown there's an astronomical number of concomitant bankruptcies indicating people are borrowing money they can't pay back.
Thanks to Cadillac Man for this insight as it does seem to balance. It was a great one.
Ed: does this mean a snipe hunt for a chart which shows bankruptcies by country?
Prob'ly so but not just now. Just now the Silas will find some horizontalism.
(Time passes)
Here's a chart on bankruptcies by country but good luck making sense of it and trying to integrate it with the existing chart for household debt.
Trading Economics: Bankruptcies
2 comments:
The bankruptcy data seems to support that the countries with the highest consumer debt tend to have the lowest levels of bankruptcies. This would indicate that the consumer in these countries is borrowing with a high assumption of being able to handle the debt. On the other hand, the U.S. has the highest rate of bankruptcy by far. The lower consumer debt amount may be attributed to many consumers not having the confidence or ability to handle the debt.
At first your thought sounded kind of fishy but it sounded dead onto it as you went along with it.
I'm starting to realize how much resistance there is to anything even at slight variance with the status quo and this result isn't even close to patriotic pundit palaver so it would be surprising if it's well accepted.
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