I haven't been teeing up thought pieces on the financial system on Credit Writedowns for a while now. And that's a shame since this site's name owes to the role I believe balance sheets in the financial system play in business cycles. So, let me tee up a shorter thought piece, piggybacking on the framework longtime readers know I use to think about the economy. And since this piece was inspired by something
Hi Ed, I believe I understand your concept; however I am confused by your use of the term "equity" (rather than "assets").
Most notably, when you write "So, it's the balance sheet that matters, the value of both assets and liabilities, not the 'equity'," do you mean "it's the balance sheet that matters, the value of both assets and liabilities, not the 'assets alone'."?
Thanks for sharing your deep knowledge and explaining what you mean by this syntax, Ed. ~Mark
Hi Ed, I believe I understand your concept; however I am confused by your use of the term "equity" (rather than "assets").
Most notably, when you write "So, it's the balance sheet that matters, the value of both assets and liabilities, not the 'equity'," do you mean "it's the balance sheet that matters, the value of both assets and liabilities, not the 'assets alone'."?
Thanks for sharing your deep knowledge and explaining what you mean by this syntax, Ed. ~Mark