Quote:
Originally Posted by chassis
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"Credit Market Debt as a Percentage of the Market Value of Corporate Equities"
I think the problem is the equities (I assume it's mostly stock valuation) are overpriced so this measured may be misleading.
For example, if a corporation has a certain amount of debt. If their stock price is high enough then the debt/equity is rather reasonable. But the stock values are so volatile so in a downturn, their stock values will go down so the debt/equities will get worse. A lot of corporations used the 21% rate to buy back stocks which somewhat distort the true valuation of the corporation. So it potentially could lead to a downward spiral and hence a crash which is what people are concerned.
Sometimes it's easy to make the wrong assumption looking at data from a static standpoint but the variables keep moving and the domino affect can be difficult to predict. I think the FED may have seen that and they decidedly took a much more dovish tone not to freak out the market.
Back in the 2008 crash, it's the consumer that was overly leveraged. The consumers seem to be fine now.