It’s time to face a few facts. The recovery, such as it is, was bought at a very high price, too high, really, and it is both false and unsustainable.
Politicians are essentially and effectively clueless at this juncture, posturing over the wrong issues and proposing the wrong sorts of responses. For example, even if one did not know anything about Peak Oil, promoting the highway bill as a legitimate means of promoting economic growth when oil is near $100 per barrel is perhaps not the best use of a couple hundred billion dollars.
Central banks are no better punishing savers and the prudent with zero and/or negative interest rates as they attempt to bail out the reckless banks and get credit flowing again like it once did.
The debt problems of the United States and Europe are almost exactly the same. Both regions drank the Greenspan Kool-Aid offered up in the 1990’s and 2000’s, and both are now saddled with too much debt and promises that are too large to keep.
Three simple words are all we need to understand the economic malaise: Too much debt.
That’s the fundamental problem here, not a failure to tax enough, or tweak a few policies, or print some more thin-air money, or even to get credit flowing again (read: growing again).
That’s the long and the short of it. Anybody with a calculator and a modicum of common sense could tell you that such a state of affairs was not sustainable, nothing can grow forever yet, and believe it or not, that was the plan.
A recent Financial Times editorial captured this nicely:
America and Europe sinking together
In Washington they are arguing about a debt ceiling; in Brussels they are staring into a debt abyss. But the basic problem is the same. Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem. America and Europe are in the same sinking boat.
The debt debates underway in the US and the EU are so inward-looking and overwrought that surprisingly few people are making the connection. Yet the links that make this a generalised crisis of the west should be obvious.
On both sides of the Atlantic, it is now clear that much of the economic growth of the pre-crisis years was driven by an unsustainable and
by lg1 
