There was an article in the Globe and Mail about this earlier last week… I can’t find it online and I don’t wanna type it out, but here is a similar article:
Article makes some good points. The trouble I forsee is that shifting the massive debt burden to government, to bail out the financial system, is that government must now either increase taxes or debase the currency, in order to pay interest. (It could repudiate debt but that’s unlikely for us.) This must reduce aggregate demand – the people lending to government have more of a propensity to save (like the Chinese), so money is transferred to non-spend-a-holics.
Check out Mike Shedlock’s blog. He’s saying the same thing.
The thing to keep in mind that all of the people telling us that we’ve turned the corner on this recession are the ones who were telling us everything was fine in 2006 and that we needed to get into the housing market right now. Insanity is listening to these people again and expecting better results.
One of the guys over on the Market Oracle (where Shedlock contributes) says he found something like 12 economists out of over 15,000, who predicted the meltdown. Almost all of them had no clue. But we don’t need economists to tell us that we can’t spend more than we earn…forever.