from Australia Daily Reckoning:

Fear the Boom and Bust

The Business cycle theory, which explains how the crisis we are in comes about and how it plays out. "Blame low interest rates" says the chorus.

Here are the key verses:

"The place you should study isn't the bust
It's the boom that should make you feel leery, that's the thrust
Of my theory, the capital structure is key


"So the boom turns to bust as the interest rates rise
With the costs of production, price signals were lies
The boom was a binge that's a matter of fact
Now its devalued capital that makes up the slack."

If this sounds familiar, have a look at the Albert Edwards quote above. Mr Edwards comes up with the same argument almost 100 years later than School of Economics.

It's the "expansion of credit" that signals the onset of another bubble, or "fig-leaf of continued prosperity." If you don't see that expansion of credit happen , then we may be heading for trouble instead of another fake recovery. We will keep you posted on that.