Recessions are meant to be about fixing economic problems that built up during the previous boom – unwinding imbalances in the parlance. Higher unemployment, with all its consequences, business failures, and higher government debt are the price of putting the economy on a more sustainable platform for the future.
But it’s not happening. All the problems are re-emerging.
The currency is back in the mid-70s US. That’s devastating for all exporters except dairy, which is riding the international price boom just as it was before the global recession. House prices are back to the peak of the bubble.
We’ve got the same problems we had two years ago but now we’ve got higher unemployment and government deficits too.
Internationally, nothing has fundamentally changed regarding the causes of the crash. The banks are still unregulated, the toxic assets are still on their books, and the price of oil is marching relentlessly upwards.
It’s looking evermore certain that the world is only lifting out of recession because of governments’ stimulus but that’s not a sustainable solution. It’s like using a defibrillator to get a person’s heart beating again – it might work in the short-term but, unless you use that opportunity to fix the underlying causes, there will just be another crash.
We were told that there would be no return to the past. That in getting through this crisis we would reform the international economy on a more sustainable footing. It hasn’t happened. The problems haven’t disappeared, they’ve just been temporarily masked. Sooner or later, we’ll face the consequences of the governments’ failure to act.