Bad Debts of the World Unite!

Back in the USA, it’s still fat city. Thanks to fear of European debt, the waiters are bringing the sundaes to the US.

And here’s our own Number One ice cream salesman – Tim Geithner – in Europe. He was in Berlin on Thursday. What flavor was he pushing onto the Germans? Tutti Frutti!

He told the Germans that the US was “totally behind a cooperative, worldwide approach.”

In other words, instead of letting bad debt go bad on a case by case basis…as it should…the idea is to put it all together…get the whole world in on it…so then the whole world’s credit will go bad!

But make no mistake. As the quantity of debt increases, the quality of the credits falls. It doesn’t matter if you spread it out…or concentrate it…or put it off…or put on a fruit topping. You eat too much of this rich dessert and you’re going to throw up.

Europe is reluctantly still adding debt… America is eagerly adding debt. And all the debt is becoming less effective and less valuable. Sooner or later, lenders will cut off the ice cream sundaes to all of them….

Yes, dear reader, this Great Correction has a long way to go and a lot of work to do. But at least it is underway… Now that we see the savings rate move up again, there’s not much doubt left.

There is no recovery…and no going back to the bad habits of the Bubble Epoch…

So forget the bailouts, boondoggles, and transfer payments… Pay no attention to Wall Street or Tim Geithner. Don’t bother to listen to CNBC…

You already know what is going on.

It’s the de-leveraging, stupid!

Bill Bonner
for The Daily Reckoning

The Daily Reckoning