Kass: Fragile Foundation for Growth

This blog post originally appeared on RealMoney Silver on Nov. 5 at 8:18 a.m. EST.

I continue to believe -- and the evidence is mounting (as is abundantly clear from my talks with widespread corporate management teams who almost universally underscore their unclear and weakening outlooks) -- in the grim reality that, despite massive policy intervention, the world's economies are dropping at a rapid pace, and, equally important, the corporate profit outlook lacks visibility into next year.

This characterization is emphasized by the magnitude of fiscal and monetary relief, which is historic in scope and seems to multiply daily/weekly. Those policy decisions reflect the broad and widening set of economic problems that run deeper than any given time in many decades. Our financial system nearly folded under the pressures of the egregious use of debt at almost every economic level in the public and private sectors, a lack of lending and borrowing discipline, uncensored consumer spending and a general disregard by regulatory authorities, especially toward the emerging shadow banking system.

Thus far, the credit markets have thawed in a consistent and sequential improvement in LIBOR, spreads and other measures over the last two weeks. That's a good thing, but it doesn't mean that the availability and cost of credit will readily improve. Indeed, tight loan conditions persist as banks remain wary of lending.

The foundation of economic growth remains fragile, and I will continue to use the parallel that economy is akin to a patient who has suffered a massive coronary and doesn't recover like he has from prior colds and who doesn't go out and play three sets of tennis after that heart attack.