It's been said by far too many dirty hippies that the real estate / CDO / CDS nightmare which America gave the world isn't over yet.
The efforts to stop the meltdown by temporarily shoring up the financial sector (both in America and Europe) succeeded, and gave Dogs like me an opportunity to bark on the sideline about protecting the Owner Class and the Banksters.
However, the $1.2 Trillion US given to our financial sector between the Crash and the end of the Obama 'Stimulus' -- and the subsequent bailing out of French, German, Irish, Swiss and British banks -- has only slowed the rate of collapse, because all the overvalued securities are still out there. All the Credit Default Swaps have piled up since.
When the Market rallied in mid-2010, every trader and hedge fund manager jumped in (they had to; their clients would've fired them if they hadn't). Now, most investors (including 401(k)s, mutual funds, pension plans, etc.) have stock-heavy portfolios and are at risk if the Market falls.
Bonds are just as risky for different reasons: There literally is no safe investment haven, now -- except (Glenny Beck will be so pleased), possibly, gold. When it ingested the American CDO/MBS's, the interconnected global financial system took a slow poison, and no one knows if it will die from having done so, or not.
All the effort so far has been to find a way to 'unwind' the debt, to pay it off but it can't happen fast enough. The only plan so far -- and it's not much of a plan -- is to have governments pay money to the Banksters, taking on their debt. Then, to force huge budget cuts upon their people, so that what was the failure of greedy individuals (and should have remained so) translates into reduced standards of living for whole populations. Meanwhile, the wealthy continue to live essentially as they did before.
Want to know how interconnected and bad it actually is? Read a Swiss financial advisor's analysis. And for what it's worth, it won't matter whether nations use fiat currencies or have a precious-metals-based monetary system; past a certain point, the political effects of economic declines are the same even if the financial mechanisms to solve them differ.
It seems that the trigger, in terms of an unwind, whether it is the credit default swap market, or something causing default in an individual country, may be democracy -- where people say, We can’t bear these austerity measures, and whatever government is going to impose them on us is a government that has a very short shelf life. Give us another election and you are all out, every one of you. It seems perhaps the instability is in the people, themselves, who won’t stand for the pain.I'm not alone in believing we're closer to some 1930's-style political upheavals in the world than we think, and America isn't immune from that history. Human nature hasn't changed much in seventy-eight years, either; at some point, the economic pain will be so severe that a political breakdown becomes inevitable.
The last time the world was in this extreme a crisis, it ended up with Hitler, Tojo, the Holocaust, and the Rape of Nanking. The Second World War was, unfortunately, the cure for America's Great Depression.
We haven't reached bottom yet. Timmeh's trying to tell us that there literally is no end in sight to this financial crisis, worldwide, and no telling what will happen to us, collectively or individually.
Mehr: An Op-Ed at The Economist ("Debt Reduction -- Handle With Care"), says frankly that the process of unwinding the debt (aka 'deleveraging') in what was once called the industrialized West will take years.
It seems that the most hopeful prognosis of the analysts is that the U.S. and Europe enter into a slump, even worse than we're currently in (but no way to know how bad). High unemployment will continue, as will weak GDP expansion, and political turmoil in countries where the New Austerity is jammed down the throats of their populations.
Eventually, after perhaps a decade (no one really knows), things may begin to 'pick up' -- but between now and whenever that is, the lives of hundreds of millions of people will be reduced in quality, and their expectations for themselves and their children likewise will have to be lowered. It will look and feel very much like the 1930's -- there will be the same tiny Owner class, not much of a 'Middle' class, and the vast majority of people "just scraping by".
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