Michael Mackenzie's last Sunday The Long View article, (FT July 2, 2017, "Taper tantrum II lacks summer blockbuster status,") describes the conditions that indicate that the credit crisis is not over. It should be evident from bonds, yields, low productivity and rising debt that it is a crisis like a slow Jim Dine Fluxus car crash. Given the fact that central banks cannot raise interest rates or sell their debt without initiating a crash, demonstrates that debt is overhanging economic recovery. Too many "zombie" banks and businesses are surviving on basically the free money central banks have provided with continued refinancing of bonds and new credit. Wages are still flat across the globe from England to Japan (even with historic labor shortages as in Japan, see Robin Harding, FT July 2 2017, "Japan labour shortage hits 43-year high but no sign of rising prices").
If we revisit Ben Bernanke's writings on the Great Depression (2002) we find him faulting intervention as a source of instability, James B. Steward of the New York Times said this in 2011 evoking the "recession within a depression" idea of mistiming intervention:
"The events of the last few weeks — gridlock in Washington, brinksmanship over raising the debt ceiling, Standard & Poor’s downgrade of long-term Treasuries, renewed fears about European debt and a dizzying plunge in the stock market — bear an intriguing resemblance to some of the events of 1937-38, the so-called recession within the Depression, with a major caveat: it was a lot worse back then." But for all the debate over the timing of the government action in 1937, the results were a new low of depression of economic activity.
Only the arrival of WWII allowed sufficient intervention, and kinds of it, as well as duration that had been blocked by the Republicans then as now. Price, rent and consumption controls, limitations on credit and massive and sustained government action directed employment and production as well as investment. We will not see an end to the present crisis until we have some like process. One might argue that the Chinese are doing this, and perhaps that is what is sustaining their economy. We shall see.
Niccolo Caldararo, Ph.D.
Dept of Anthropology
SFSU
Remarks by Governor Ben S. Bernanke, At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois November 8, 2002, On Milton Friedman's Ninetieth Birthday, The Federal Reserve Board:
https://www.federalreserve.gov/boarddocs/speeches/2002/20021108/default.htm ;
James B. Steward, "Aftershock to Economy Has a Precedent That Holds Lessons," NYT, Aug, 12 2011.
