http://bloggingheads.tv/diavlogs/17812 It's both.... What if most of the marginal corporate debt had no bid ? In Asia....unlike the US....this is largely the case.... What if this happens in the US ? ................................................................. The de-leveraging is largely to blame....and the elimination of trillions in credit is a self fulfilling profecy to certain economic calamity.... ................................................................ Who wants to hold on to a BBB credit for 5 years ? ................................................................. The question being.... There is nothing to do but to watch it happen.... Why ? Deleveraging.....the elimination of trillions from the marketplace.... ................................................................... In simple terms.... Before there was $70 Trillion in the box....Then over $30 Trillion was eliminated.... Thus it is not possible for the value in the box to be over $40 Trillion.... ...................................................................... The government is not going to replace over $30 Trillion with $800 Billion.... ...................................................................... Thus welcome to the "new valuations" world.... .................................................................... So now the next error to be made is simple to view.... The government will try to increase a progressive tax rate on a diminishing earner base....which is taking more from less.... So how it is possible that the economy can improve ? ................................................................... The fact of the matter is that the US government has to dramatically downsize as it will have to either change permanently to a 10% consumption tax only....or will bandaid on a temporay basis the current progressive structure to reflect the same revenue....Bandaids do not promote investment.... Any other avenue will result in dramatic increases in debt and monetization.... ................................................................. One should hope that the government will change prior to calamity rather than after calamity.... ................................................................ What is clear is that more bids/asks are needed.... This requires a new world class securities exchange which makes the information boilerplate clear....and the transactions cost minimal along with the bid /ask spread.... Liquidity by itself ....which means "more traders" in the system will go a long way to promote a more vibrant economy.... A less clear, fragmented securities market with scant information and expensive trading costs to wide bid/ask and commission costs....will further crush what is already low valuations in a de-levered economy.... ...................................................................