Cheer up! This permanent state of emergency is doing a wonderful nothing to unwind the bubble...
So 2012 will mark the fifth anniversary of the global financial crisis. There's little reason to think it's reached its end yet. Merry Christmas.
Banking and household leverage in the rich West has barely ticked lower from the credit bubble's historic peak of 2007. Financial leverage has only been reduced by a fraction, while governments have been stuffed like a French goose with that new debt spurned by the private sector since 2008.
So why this slow, seemingly permanent pain? Because interest rates are still set at zero, with no uptick in sight - an emergency measure that's now etched in stone. "There is a lot of financial stress out there," the UK insolvency specialist Begbies Traynor moaned last week. "[But] if it wasn't for low interest rates the number of insolvencies would have been twice what they are." Twice as many debtors would have enjoyed a write-down, in short. But do you really think their creditors sleep any better knowing what's keeping debtors in debt?
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