In his inaugural Washington Times column, Robert P. Murphy draws a line from the NASDAQ bubble to the possible collapse of the Euro:
Note the pattern over the last decade: Instead of giving us a painful but standard recession [in the wake of the dot com bust], Alan Greenspan gave us the illusion of a quick recovery in the early 2000s. When the housing bubble burst, it was no longer a mere recession we faced, but the collapse of major investment banks. Once again, the Fed intervened to spare Americans such a catastrophe.
Two years later, it was now not banks but small governments that were at risk of going bankrupt. But as usual, the central banks rushed to the rescue, apparently solving economic woes by creating dollars and euros out of thin air.
Then a year later, the problems resumed. Now it wasn’t just small governments at risk, but large governments and a major currency.
The pattern is clear: Printing up money (or more accurately, creating electronic reserves by purchasing assets and expanding the central banks’ balance sheets) can kick the can down the road, but it doesn’t solve the underlying structural problems with the economy. …
The latest “rescue package” in Europe may work for a while, but it will ultimately collapse.
It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar.
Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet.