MBA Mortgage Applications +1.3%
Nonfarm Productivity -0.9%
Unit Labor Costs 1.3%
So labor costs are still rising while productivity is declining. Sound like a good situation to you??? Me neither.
Bridgewater Daily: Who Will Take the Losses?
A normal debt degenerative process is a bit like Chinese water torture. Because debt service payments come along bit by bit and each bit is small relative to the sum of them, when debtors first encounter debt service problems the creditors' inclinations are to lend money to fund the gaps. However, as the bits mount up and the debtors' financial conditions decline and it becomes clear that losses will continue to mount up, the creditors' incentives change, leading them to move to restructure the debt. At that stage, which is the stage that the European debt crisis appears to be entering, the funding and default risks increase. In Europe, that is especially risky because it could lead to the collapse of the Eurozone which would have traumatic repercussions for the world financial system.
So, if a debtor can’t pay their debts, if they can’t even pay the interest on their debt, lending them money to pay the interest on their debt is NOT a good thing. How is it possible that we’ve gotten to the point where common sense has left the building?
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury