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That there are credit limits the world is learning for the second time these days. In the early '80ties there was Credit Crisis I. Credit Crisis I was about the new petro wealth that was put into western banks, which has lead to a situation where the western banks has lend these petro dollars on their own risk as loans to governments of wannabee emerging markets. Wannabee emerging markets are equal to capable of consuming large credit volumes, not equal to actual production emerging. When these governments couldn't lend more, they start to stop paying (something similar happens these days in the USA). The bank governance authorities than correctly demands of the banks that they should make write downs on these 'assets'. Credit as resource has it limit. Not if credit is backed up by real economic achievements and by a reasonable own risk of the credit taker. Free credit leads to chaos, ironically paid by those who have saved. Jim Rogers: "We face the end of the liquidity party." Even capital giants as Carlyle face liquidity problems.

Author: Gijs Graafland

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