Even leading economic commentators sometimes hesitate to call it, when the situation is so bad. There is always the risk of setting off a panic. Appearances are everything and volatile currencies, simultaneous property and stock market bubbles, all with people exploiting historically low interest rates with their historically high debt levels, make for a dangerous recipe indeed.
The governments and central banks responsible for the policies which caused these conditions have a fatal conceit. They have failed to heed the lessons of structural causes from the 2008 crash. Central banks meddling with interest rates have distorted our economy, causing huge misallocations of investment by stoking ‘the business cycle’ of boom and bust. This is compounded by governments’ ‘moral hazard’ cultivating policies of corporate welfare, insuring private banks to gamble wildly, which has led us to this situation, again.
Our governments are in denial and have simply doubled down on the very policies which have led us to this danger. For example: the bad banks of 2008 are still with us, they are now bigger, with even worse percentages of banking assets and derivatives. Everything that was bad in 2008 is worse in 2016.
To re-inflate property and stock market bubbles (to keep the party going), means government central banks have had to print money and suppress interest rates. This long running sham, since 2009, has distorted our economies to become addicted to cheap money and to debt. It has also destroyed incentives for workers to save. Thrift has been made a sin. A culture of short-termism, borrowing, spending and risky investment rules.
Cheap money is borrowed to flood the housing market, which combined with help-to-buy schemes and daft planning laws choking supply, has forced up property prices. The enormous property bubble has been re-inflated, again. The result can only be a terrible pop!
