Do something? but debt still a noose

With Obama’s town hall talk today and the FOMC meeting Tues, we will hear again that from both a fiscal and monetary policy view, the Gov’t will continue to ‘do something’ to recharge economic activity. After seeing the Fed’s Q2 flow of funds statement on Friday, the endemic problem plaguing growth still exists and that is too much debt. Household debt is down only 3.4% from its record high, corporate debt is at an all time record high (the liability side of all that cash on the balance sheet that we hear about) and federal Gov’t debt is of course at a record high. The only sector that has deleveraged to any discernible degree is the financial area whose total debt is down 14% from its peak. So, instead of letting a recession cleanse the economy of its previous excess of too much debt, the Gov’t is still trying to put humpty dumpty back together again, that of borrowing and spending to generate growth as opposed to saving and investing.

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