NOVANEWS
Posted by: Sammi Ibrahem,Jr
The term “vicious cycle” applies to the world economy. Another way to look at is the Great Unwinding. Assets bought with debt are crashing in value causing even more assets to show up in fire sales. As for the money borrowed to buy these declining assets, the loan agreements will make good kindling.
A promise to pay is only as good as the promiser – and bankruptcy changes the game. Loans are financial assets and as banks have to write then off, they also have to lower their reserves which lowers the amount of money they can lend which reduces asset prices…a vicious cycle and we’re far from the end of it. In fact, we’re only at the end of the beginning.
