Well said. And the debt is indeed the big factor that ECRI doesn’t seem to take into account. And so their methodology worked great during the great leveraging of the last couple of decades, but this is likely to be their downfall here. They’re sure laying it all out on the line, that’s for sure. They’ll either be hailed as the contrary geniuses of our time, or thoroughly discredited for their foolishness, by the time this is over with.

Whether you believe in ECRI’s and Jim Grant’s methodology — at this point in time — turns on whether you think the government can restart the credit cycle by levering itself (e.g., borrowing to do cash for clunkers), by levering consumers through financing from GSEs (e.g., FHA), and by persuading companies to leverage themselves in LBOs by themselves or due to activist investors or private equity. And how long consumers and banks can keep a lid on interest rates due to increasing their purchases of US treasuries, and how long foreign central banks will continue to support treasuries and the dollar.

If the government can’t increase leverage enough to start a new credit cycle, or if consumers, banks, and foreigners lose their appetite for treasuries or the dollar, their forecast falls apart. Further, unless the net increase in leverage is big, it is hard to see big time growth (given the rest of world isn’t in shape to import a ton of US products). Moreover, down the road, there can be an even bigger crash unless the additional leverage is used to make worthwhile investments that grow the economy, as opposed to useless crap.

“White House says 650,000 jobs were created or saved by $150 billion in stimulus funds.”

That is a cost of ONLY $230,769 per job. Since all the jobs saved were on Wall Street, that is a great bargin!!!! The White House should be PROUD! Good work!!!!! (What the hell as they smoking?)

What good is that?