The great credit contraction slows economic activity. The over-leveraged die a slow death as top lines evaporate and debt service drains all available free cash flow resulting in less investment and spending.

Lower economic activity means lower profits. Lower profits mean lower tax revenues. Often there is government spends to compensate because politicians are spineless. This is in the face of an increasing trade deficit because of imports like oil. This causes the budget deficits, both state and federal, to balloon exponentially and reflected in the current account balance. Capital has to be attracted to the US but is instead fleeing which puts added pressure on the FRN$.

Good article. Can you please explain the charts. Also, some might argue that the pace of declining dollar, job losses, deficits is not accelerating but slowing. That seems to be the trash I read in the WSJ. “Contracting at a slower rate” seems to be a repetitive theme these days…

Dave