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Wednesday, August 11, 2010

America: Already Bankrupt

Good morning. I am just going to link to this commentary (at http://noir.bloomberg.com/apps/news?pid=20601039&sid=aiFjnanrDWVk) which speaks for itself.

The facts related in this article, and the inferences one may draw therefrom, engendered the deficit hawks (and the Perot and Concord Coalition movements of the early 1990s and today's Tea Parties).

On a related matter: Ever wonder where all the stimulus money -- paid for by you and me -- has gone?

I believe this stimulus money has gone straight into the pockets of certain business owners and corporations. But anecdotal evidence suggests it isn't being spent. It is being hoarded, as if there is an expectation of an impending nuclear winter.

The causes of this trepidation: a growing uncertainty over future legal changes (from new regulations); the growing erosion of the rule of law and sanctity of the contract as more judges grant mercy to debtors claiming hardship or victimization; and an uncertain economic climate.

Remember: Mercy to the borrower, is discrimination against the lender.

When lenders get hammered by the courts and their profit margin shrinks, the balance between risk and reward also tilts. Once the balance clearly tilts more heavily towards risk (where we are now), the reward prospect will be insufficient to induce investment or risk-taking. Capital will stay home. That has been what is happening this year.

(Eric Dixon is a New York lawyer and the president of Eric Dixon LLC. He is reachable for comment or consultation at edixon@NYBusinessCounsel.com.)

Sent from my Verizon Wireless BlackBerry

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