Network drivers in Bankruptcies and Deflation Talk
Check this one First

The BBC rounds up the stories as 2002 produces US Bankruptcies with 186 public companies going bust with £230bn in assets, dwarfing last year's record $259bn. As the Redherring story in the earlier blog points out, many of these companies are in Chapter 11 and heading for a second round which will pull down even healthy companies.

Even more interesting is the point that

Whereas 2001's corporate failures were predominantly the result of debt problems, accounting scandals were the most notorious feature of 2002's list. Of the five biggest failures, four featured accounting trouble.

These are the results of learning that spreads through the network of the most highly connected companies, each of them infecting their colleagues and, because the process operates at the highest levels ofbusiness, when the dam breaks oit takes with it the biggest companies who had the most to gain, and lose.

The excellent Paul Krugman in his NY Day NY Time comment (Free Reg required and only up for a few days) charts the spread of talk about Deflation in the US media.

In the first 30 days of December 2000, according to Nexis, only six articles in major news sources contained both the word "deflation" and the phrase "United States"; none of those articles suggested that deflation in this country was a real possibility. In the same period last year there were 292 hits; this past month there were 566.

I wonder how much of that spread is because writers have woken up to the nasty realities underlying the US and Global economy and how much of it is the usual, lazy, journalism that helped so much in getting us here in the first place and continues to ignore the Real Estate Bubble.

BTW, Happy New Year or, as a friend of mine from India wrote

Holiday Greetings (as cleared by our Lawyer)


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