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Happy birthday, Great Recession!

If you date the Great Recession from the collapse of Lehman Brothers (which is arbitrary but a satisfyingly dramatic point to hang the story on), it is 10 years old today.

Of course we all know the recession “officially” ended ages ago, brilliantly conceived and executed government bailouts saved the global economy, and the whole world has put all that unpleasantness behind it for yet another era of Eternal Prosperity. But then, we also all know … otherwise.

So here are 10 myths and misconceptions people still believe about the causes of the catastrophe.

And here, from Daniel Lacalle via the Mises Institute is a blow-by-blow account of Lehman’s fall and the sorry “solution” to the crisis: More Lehmans. The conclusion:

Monetary laughing gas has covered all asset classes with a fake blanket of security, disguising risk with ultra-low rates. We have solved a crisis of excess risk, debt and imbalances increasing debt, imbalances and taking more risk for lower returns.

We have learned a few things from Lehman, except that it seems that we want to replicate the same bubble with inflationary policies. The Lehman crisis was solved incentivising more Lehmans.

The next one will probably not be 2008-style crisis, it will likely be a Japanese stagnation solution, as the biggest risk today is in sovereign debt.

When the bubble bursts, governments and central banks will blame speculators and lack of regulation. And fuel the next bubble.

2 Comments

  1. ~Qjay
    ~Qjay September 15, 2018 1:40 pm

    Some interesting stuff in the 10 Myths link.
    A lot of it is sprayed out as truth by the media, but I do have to take it with a grain of salt: it’s a Bloomerg.com opinion piece by an author who references his book on the crash a few times.
    I’m not saying it’s wrong, but it caught my attention in the sniff test.

  2. Comrade X
    Comrade X September 16, 2018 11:01 am

    For the repeat in spades it is not a matter of if but when.

    At some point the funny money runs out and then what?

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