There are many celebrating the recovery as if it were already here.� This is a brief post to outline my main remaining concerns for recovery of the global economy.

1)� China is overstimulating its economy, and forcing its banks to make bad loans.� This pushes up commodity prices, and makes it look like China is growing, but little of the investments made are truly needed by the rest of the global economy.

2)� Western European banks have lent too much to Eastern European nations in Euros.� The Eastern Europeans can’t afford it, and widespread defaults are a possibility.

3)� The average maturity of bonds held by foreign investors in US Treasuries is falling.� Runs on currencies happen when countries can no longer roll over their debts easily, which is facilitated by having a lot of debt to refinance at once.

4)� On a mark-to-market basis, market values for commercial real estate have fallen dramatically.� Neither REIT stocks nor carrying values for loans on the books of banks reflect this yet.� Many banks are insolvent at market-clearing prices for commercial real estate.

5)� We still have yet to feel the effects from pay-option ARMs resetting and recasting.� Most of the pain in residential housing is done, but on the high end, there is still more pain to come, and the pay-option ARMs will reinforce that.

6)� The rally in corporate debt and loans was too early and fast.� Conditions are not back to normal for creditworthiness.� There should be a pullback in corporate credit.

7)� We had global overbuilding is cyclical sectors 2002-2007.� We overshot the demand for large boats as an example.� We overdeveloped energy supplies (that will be short-lived), metals, and other commodities.� It will take a while to grow into the extra capacity.

8 )� The US consumer is still over-levered.� It will be a while before he can resume his profligate ways, assuming a new frugality does not overcome the US.� (Not likely by historical standards.)

9)� The Federal Reserve will have a hard time removing their nonstandard policy accommodation.

10)� We still have the pensions/retiree healthcare crisis in front of us globally.

That’s all.� To my readers, if you can think of large unsolved problems in the global economy, forward them on to me here in the comments.� If I agree, I will incorporate them in future articles.

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