"Excess leverage in the corporate and household sectors is certainly not a new issue of concern over the last few years. Set against this anchor has been monetary accommodation on a scale seldom seen in US history. As one of the greatest bond bull markets in history has played out over the last twenty years, the potential ill effects of excess leverage have been kept at bay in terms of acting as a drag against economic expansion. But it sure appears to us that both corporations and households have reached the point where they simply may not be able to hold up their end of the bargain in terms of participating in a hoped for classic economic recovery ahead post an assumed inventory rebuild. Weighed down by leverage, it does not appear reasonable to assume a new round of corporate capital spending dead ahead. Likewise hampered by current unemployment, above average recessionary consumption for this cycle, and debt heavy personal balance sheets, households offer little in the way of pent up demand so necessary in the annals of classic historical economic recovery experience."
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