The End of an Empire caused by Spiral of Ignorance.
Lack of understanding of the credit crunch is magnifying its damage. Almost nobody appears to know what he is talking about. The havoc of this financial crisis has stretched and outstripped most economists. Governments do have Ministers who are still moving back and forth between wishful thinking and Armageddon in trying to predict the best of all possible recoveries. The truth is that hardly anyone in charge has more than a rudimentary grasp of this crisis, with many of them not even having much of training in economics or commerce.
Banks took far too much risk with their rogue behaviour of novel banking magic that put the world economy in the grip of this severe depression. Now the feds are obsessed about their monetary policies to creating financial stability with their bailouts that eventually will lead to nowhere. The conclusion unfortunately is right that there are not too many around in Authority to be entrusted with solving the mistakes and ruses that caused this crisis. There are merely a few capable to comprehend this financial mess and possibly able to fix it.
First it is important to realize that this time is totally different. Because it is not a recession, it's a very real Depression with all that goes with it, including that whole industries go broke, with a big drop in consumer spending, falling prices, interest rates at zero, and widespread bankruptcies of households and retailers. Causing a huge political shift toward some other ‘ism’.
The world has never seen stimulus efforts of such a huge magnitude as now have been implemented and those still are not sorting any real recovery. This time, consumers are running scared they're losing their jobs and closing their wallets. Better to become conscious that this crisis won't end quickly, or easily.
The amount of excess debt in the United States is about $20 trillion. That's the difference between the usual level of debt of about 150% of GDP and today's level that is about 350%. That $20 trillion in surplus debt probably has to disappear before a true growth cycle can begin again. The best way is simply to let nature take her course. Much of it would be written off in a few months. But the feds won't let that happen. They're doing all they can invent to prevent assets from getting marked down, and to avert debt from getting written off. So far, they've committed $12 trillion to the fight against debt deflation. So instead of writing this debt off, it will have to be paid off or most likely be inflated off.
Currently savings rates have risen from zero to about 3% of GDP. That's about $420 billion per year. Erasing the debt of $20 trillion at that rate will take more than 40 years.
The US Empire, like once the Roman Empire in the past, has come to an end, as a consequence of living beyond their means for too long. America and the west got in the habit of getting shiploads of things from Asia by paying for with pieces of green coloured paper, only to neglecting their own manufacturing potential. The thinking was; let the Asians sweat, while we do the thinking. Not much serious thinking took place over the last 20 years. Complacency at Government, Banking, Wall Street and GM at industrial level took hold. Looks like the same claptrap sold by the Roman Empire, 2.500 odd years ago. The conclusion may be justified that another Empire has come to its end. Look forward to see how a possible next will look alike!