Great piece on credit — I had two questions about your comments:

1. You said that this crisis is bigger than the S&L crisis but in my mind its more dispersed because its securities vs. bank loans last time. I wonder if that makes a difference in terms of the system’s ability to recover — i.e. more dispersed means our system will be more resilient? Obviously it doesn’t appear that way yet and one issue I can already think of is the dispersion may make it harder for the system to recognize losses (price discovery is hard, lack of accountability in the structured area, etc.) but I was curious what your thoughts were?

2. Sounds like you believe credit will keep growing as it has for the last 25 years — I was at a dinner last night where David Tice (prudent bear funds) spoke and he argued that debt was at unsustainable levels (relative to GDP) and that credit growth has been the driver of GDP growth so if credit shrinks we must have a recession. He also argued that capital markets would retrench in the sense of much lower debt issuance and that banks were ill prepared to offset bonds to keep credit growing. He thought this would happen because structured products have removed trust from the system — no one wants to take the risk of owning a security when you can’t count on the rating or the insurance. I was wondering how strongly you believed credit would continue to grow and is that why you don’t see a depression that others appear to be predicting?

thanks

Kyle

Just to set the record straight on your point #1, as stated in the opening paragraph of the linked-to webpage:

…by James Glassman, economist at J.P. Morgan Chase. (no relation to James K. Glassman, co-author of “Dow 36,000″).

So, you may still question why he gets airtime given his real estate forecast, but you can’t support your questioning with his stock forecasts LOL.

A stickler for accuracy at times,

Steve