Recovery or Relapse?

It is too depressing to read about the total impunity surrounding the murder of an American citizen by pirates—not of Somali nationality—on the high seas. So I turn instead to another distracting topic: lay observation of the economic news.

A week ago the Spanish government eked out a drastic program of spending cuts to satisfy the financial markets worried about that country’s debt burden. This was considered necessary because otherwise Spain would be penalized by the big banks and forced to pay higher interest rates.

So what happened? The lower government spending resulting from the austerity program was seen as stunting Spain’s growth prospects—and interest rates went up anyway. Damned if you do, damned if you don’t.

Europe’s economy looks increasingly as though it is headed into a cul-de-sac: the European states, first the PIIGS (Portugal, Ireland, Italy, Greece, Spain), then Thursday Hungary and now even Belgium and France, are all in the bankers’ sights for liquidity and even solvency problems, and any solution threatens further deterioration of economic conditions. In short, they have a version of the problem we had two years ago and may have again shortly. Many of those who purport to know say the spillover will reach us as inevitably as BP’s oil will enter the Gulf Stream heading for the Atlantic.

In fact, here at home Wall Street for several weeks has looked like a pea-green boat tossed upon cloudy seas with wild swings in every direction. Despite the generous bonuses being paid out by the happy banker class to itself, its traditional arrogance fully restored, the problems it created for us all appear not in the least resolved.

Employment is anemic, and the excess housing supply from the bubble years overhangs that grim market, stifling consumption as over-extended householders fret over their economic future. Skeptical economists debunk excessive optimism, and one even announced the ‘double-dip’ recession is upon us already.

It adds up to an abruptly nervous state of affairs. No one really knows if the ‘recovery’ is on track or a mirage in the desert. Meanwhile, the lame financial reforms passed by Congress and actively shaved and weakened by the Obama White House to avoid antagonizing Wall Street have left the perpetrators of the worst economic crimes of the last 50 years unpunished and ready to start all over where they left off.