Titanic Panic

Guambat is amused but not humoured by the rapid, raised and razzled voices on CNBC as the DJIA plunges, off over 500 points as Guambat posts. The buzzword/buzzphrase seems to be "demand destruction".

Well, Guambat Pellets! There is no more, or less, "demand" destruction than there was demand concoction, attributed to the inscrutability of insatiable Chinese growth over the last several years, but in reality being the bulging derivative debt, as discussed in that last post.

This is de-leveraging, plain and simple. If there was any truth to the story of fundamental growth in the Chinese, Indian, etc. countries, that will remain, burdened in some small way by the waning US consumer, but bolstered by the longterm growth curve of those huge and developing economies that are more internally growth oriented as every year passes. Real demand will put a floor on this financial meltdown, at some point, which might not occur until just as the last lemming passes over the cliff.

It will be very instructive to clear the deck of the Titanic debt overload to see what the real, fundamental demand of those countries is, without the skewing influence of all the front-running speculation that the financial bust-up dust-up has created.

Now de-leveraging, however plain and simple, like everything else, can create its own serious problems if taken to extreme. It is a problem that will have to be addressed. But we must not confuse the issues by suggesting demand is being destroyed. Most of what was passed off as demand in the first place was simple financially engineered bloat.

The economic treatment and therapy for debt obesity is entirely different from demand anorexia.