It is not possible to interpret debt without relating it to income; your mortgage probably doesn't look so big to Bill Gates. The statistics on U.S. indebtedness -- consumer borrowings, federal deficits and debt, U.S. international net debt -- are large and frightening on their face. But when you consider that debt is priced regularly in forward-looking financial markets, you must conclude that it is debt that predicts income and not the other way around. (Predicts, not determines: A debt deflationary collapse may be unlikely in a modern economy, but it's hardly impossible.)
So those big numbers hanging over our heads can be taken as predictions that our incomes will grow, in terms real or inflationary, to be able to service our indebtedness in much the same way that most of us have been able to handle imposing mortgages. These round numbers underscore the long and mutually profitable relationship becoming ever more evident between China and the U.S.
P.S. Will you be there when Cramer makes his next move?
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Currencies Currency Count in China 10/4/2006 8:39 AM EDT It's got two systems -- how many are really needed?
Media Economy May Hum Until Demographic Wreck 10/9/2006 2:29 PM EDT We may have a much longer, smoother expansion than ever before, but a fiscal crisis is looming.
Media Market Seems Inattentive to Midterm Elections 10/16/2006 1:52 PM EDT Most commentaries harp on the latest from the Fed but barely touch on what could be a watershed election.
Market Commentary Fed May Need to Retune Brake System 8/21/2006 2:00 PM EDT It may have to shift away from measured moves and transparency in order to foil speculation.
Market Commentary Encouraging Echoes of Cycles Past 8/14/2006 1:36 PM EDT The market's gloom is worse than its performance so far, and the outlook is brighter than most see.
Market Commentary The Manipulations People Play 10/4/2006 10:05 AM EDT For those who manipulate the energy and stock markets, it comes down to a supply game.
Jim Griffin is economic consultant and portfolio adviser to ING Investment Management and its Hartford-based unit, ING Aeltus, which manages institutional investment accounts and acts as adviser to the ING Mutual Funds. His commentary on the financial markets is based upon information thought to be reliable and is not meant as investment advice. While Griffin cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.
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