"You're going the wrong way!"
--Screaming driver (Planes, Trains, and Automobiles)
Once the initial segment on Moneyball is done, most of the remaining discussion between Charlie Rose and Michael Lewis concerns the US and EU credit crises. Some interesting points, but one issue totally ignored is where the leverage and credit is coming from.
The most aggressive speculator in the world cannot get levered 30x or more unless there exists a massive supply of credit upstream in the supply chain.
'Lack of regulation' does not answer the question of where all the credit comes from.
Not surprising, however, considering the discussion is between two from the intellectual set...
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At no time during the 'credit crunch' of 2008 did the amount of commercial-bank credit outstanding fall below the amount outstanding at the beginning of the year. In short, credit was actually ample, indeed, at an all-time high.
After the six-month pause, commercial-bank credit zipped upward again, so that by the end of the year, the amount outstanding stood more than 8 percent higher than it had a year earlier. Some credit crunch!
~Robert Higgs
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