The recession and bear market on Wall Street were supposed to have corrected the excesses of the boom...leaving the way clear for a new phase of growth.
But what sort of recovery is this?
Answer: one as phony as the recession that preceded it.
Stocks didn't sink to real values in the bear market - they're still priced at 2 to 3 times historic bear market lows. Nor did consumers stop buying and pay down their debts. Instead, they were lured to go further into debt. So the bad loans of the late '90s turned into the bigger, badder loans of the '00s.
And now, day by day, the whole world economy seems to sink into a long, soft, slow slump - à la Japan.
But wait. There's a major difference between America '03 and Japan '93. Japan was a major net creditor. America is a major net debtor. Japan had an interest in keeping its currency strong; its people had savings and were owed money by the rest of the world. America is in a very different situation - with trillions of dollars worth of debts, denominated in its own currency. It may discharge those debts by cutting back on its expenses and diligently beavering away to pay them down. It might also be tempted - under pressure from voters - to discharge them in a less honorable way...the way Germany dissolved its war debts to the allies after WWI, for example. 'Cranking up the presses' occurred to Finance Minister Karl Helfferich, just as it did, 4 score years later, to Fed governor Bernanke. In a few months, the German mark was completely worthless.
More recently, Argentina went into a major slump owing massive amounts of money to foreigners. What was the result?
Yesterday's press reports brought news that the Argentine peso lost 70% of its value last year...with domestic inflation running at about 40% per year. The Argentine economy collapsed another 12% last year.
Are we in America headed towards the pampas? Or the land of the sinking sun? We don't know. For all we know, we have a 'round-the-world ticket, with stops in all the world's troubled economies.