More than one person forecast the bursting of the Dot Com Bubble, twelve years ago. The Pets.com sock puppet wasn’t the only clue — the general enthusiasm for companies that had never, ever shown a profit proved signal enough. And then there was all the talk about how the stock market “could only go up.”
Soon after, it went down.
Then stocks rose again, in a Fed-induced bubble. And then collapsed again, along with the financial system.
Brace yourself for another rerun.
The Economist informs us that “European bankers have been saying things are fine for weeks now, even as their exposure to indebted euro-zone countries strangles their access to funding. . . . Fears of contagion from Europe have now infected America.”
The gloom and doom just rises from there.
The article is depressing for another reason, though — the assumption that governments must not let banks fail, making The Economist read like council for never-ending tax-funded bailouts. Which was the kind of thing actual economists used to warn governments against. (A long time ago . . . perhaps back when the science was called “political economy.”)
Times sure have changed, as The Economist admits. The three years since 2008 have made a difference: Now it is the governments that prove insolvent.
It’s time for The Economist to rethink its policy advice, time to call for a general overhaul of the international monetary system.
We must end the age of inflation-and-bailouts, before it ends us.
This is Common Sense. I’m Paul Jacob.