Is Greece going to set off the long feared next wave of the Great Recession?

He was very sensible that all political writers upon the subject had
unanimously agreed and lamented, from the beginning of Queen Elizabeth's
reign down to his own time, that the current of men and money towards
the metropolis, upon one frivolous errand or another,--set in so
strong,--as to become dangerous to our civil rights,--though, by the
bye,--a current was not the image he took most delight in,--a distemper
was here his favourite metaphor, and he would run it down into a
perfect allegory, by maintaining it was identically the same in the body
national as in the body natural, where the blood and spirits were
driven up into the head faster than they could find their ways down;--a
stoppage of circulation must ensue, which was death in both cases.

There was little danger, he would say, of losing our liberties by
French politicks or French invasions;--nor was he so much in pain of a
consumption from the mass of corrupted matter and ulcerated humours in
our constitution, which he hoped was not so bad as it was imagined;--but
he verily feared, that in some violent push, we should go off, all at
once, in a state-apoplexy;--and then he would say, The Lord have mercy
upon us all.

My father was never able to give the history of this distemper,--without
the remedy along with it.

'Was I an absolute prince,' he would say, pulling up his breeches with
both his hands, as he rose from his arm-chair, 'I would appoint able
judges, at every avenue of my metropolis, who should take cognizance of
every fool's business who came there;--and if, upon a fair and candid
hearing, it appeared not of weight sufficient to leave his own home, and
come up, bag and baggage, with his wife and children, farmer's sons,
&c. &c. at his backside, they should be all sent back, from constable
to constable, like vagrants as they were, to the place of their legal
settlements. By this means I shall take care, that my metropolis
totter'd not thro' its own weight;--that the head be no longer too big
for the body;--that the extremes, now wasted and pinn'd in, be restored
to their due share of nourishment, and regain with it their natural
strength and beauty:--I would effectually provide, That the meadows and
corn fields of my dominions, should laugh and sing;--that good chear and
hospitality flourish once more;--and that such weight and influence be
put thereby into the hands of the Squirality of my kingdom, as should
counterpoise what I perceive my Nobility are now taking from them.

'Why are there so few palaces and gentlemen's seats,' he would ask,
with some emotion, as he walked across the room, 'throughout so many
delicious provinces in France? Whence is it that the few remaining
Chateaus amongst them are so dismantled,--so unfurnished, and in so
ruinous and desolate a condition?--Because, Sir' (he would say) 'in that
kingdom no man has any country-interest to support;--the little interest
of any kind which any man has any where in it, is concentrated in the
court, and the looks of the Grand Monarch: by the sunshine of whose
countenance, or the clouds which pass across it, every French man lives
or dies.'

Well, if you would give me a concrete example of those "deeper structural reasons", I might be more inclined to pursue your point.

Then perhaps Australia can conquer the world and impose its superior model everywhere.

The essential point here is we don't have either an existing world government, or the means to create one, particularly one that would be acceptable to all, and preserve the freedoms we value.

We're currently not even two years down the road on an economic downturn which has been far less grim that was predicted.

It will get ugly, make no mistake. How ugly? Wait until those things we consider “rights” start to get squeezed in the interest of what our ruling politicians decree as the national interest. The uproar that greeted the mere suggestion that health care resources for the elderly might be circumscribed was genteel debate by contrast with what’s ahead. The notion that rights can be rescinded as easily as they have been obtained is not a happy thought. Case in point: my mother recalled that she and my father had to marry in secret and she continued to live with her parents throughout 1936 because the New Dealers who controlled the Pennsylvania state legislature had decreed that no married woman could be a public school teacher or hold another state job when a jobless married man could take her place. Try that out on the next dinner table debate you attend and see how many bread rolls get thrown at you by women who are convinced that it can’t happen again; times have changed, they’ve come a long way, baby. Well, yes. Nowadays most women don’t have the option not to work.

HOW LONG WILL THIS DARK AGE LAST? Ask the Japanese, who have been at it for nearly 20 years. Ask the Chinese, who are just making a heroic jump out of a medieval time-warp into a modern industrial urban society only to teeter on the brink for lack of enough food, water, and arable land even as they accumulate piles of American dollars that lose value every day. How long? As a teenager growing up in Tampa in the 1950s I recall traveling south through a ghost town called Sun City on the way to Sarasota. This abandoned village had streets, municipal buildings, sidewalks, even steps up to residential lots, all laid out during the Florida land boom of the 1920s. What it lacked were houses and residents. And so it stayed for nearly 40 years, until Del Webb developed the retirement community and resort nearby and appropriated the name. Now people are fleeing Florida once again, and ghostly, empty high-rise condos dot the landscape.

Now ask yourself, how long will it take to reclaim the empty neighborhoods in Detroit, the empty condos in Las Vegas, or Phoenix, or, for that matter, in the McMansion-style suburbs that surround Washington, D.C.? What new jobs can be created to absorb the millions who have not only lost their jobs but who have stopped looking? What will those jobs make, and who will buy what is being offered?

Buddy, can you spare a dollar? Or maybe a Krugerrand?

How does someone who doesn't post here going to answer that?

WSJ: Are we seeing a second-wave of financial distress?

REINHART: Ken and I have been arguing fairly forcefully that historically, following a wave of financial crises especially in financial centers, you get a wave of defaults. You go from financial crises to sovereign debt crises. I think we’re in for a period where that kind of scenario is very likely. I don’t think a repeat of the fall of 2008 is at stake here, where it looks like the world is going to end. But I do think there is still, for reasons that are beyond me, quite a bit of complacency out there. Eastern Europe is another source of concern, and Europe has limited resources. You can rescue one. You can maybe rescue two. But you can’t rescue all of them. The Baltics are very vulnerable. Romania is vulnerable. Hungary is vulnerable. Problems in these countries feed back to their lenders. Austrian bank exposure to Eastern Europe is great. The Italian exposure to Eastern Europe is great. The Swedish exposure is non-trivial. You started out with a major financial crisis in 2007 and 2008, in which some of these countries have seen their worst recessions, in a way that really harms fiscal sustainability, even if you were in a good shape fiscally at the outset of the crisis. It is the pattern that has been prevalent in the past, that these major financial crises have been followed by an afterwave of debt crises.

WSJ: What point, in the hundreds of years of history that you looked at, does this moment look most like?

REINHART: With all of the differences in policy responses taken into account, the Great Depression is still the benchmark. We have not seen an economic downturn so synchronized, a downturn in trade so sharp and widespread, post-World War II. We have not seen this many economies in the advanced world, which accounts for the lions’ share of world GDP, simultaneously have financial crises since the 1930s. Nothing even close

Funny how General Motors was able to pay off its loans, despite the dire warnings of the legion of Chicken Littles in this country