After the sturm und drang of the financial crisis, the markets have gone very very quiet. Even with some gigantic crises looming (hello, California), stocks tick steadily up on light volume.
There’s no real sign of an economic recovery. Global trade remains way down. The folks on TV try to get excited over the fact that housing starts are edging closer to 0.
For now, the government has succeeded in stemming the crisis by transfering trillions of dollars in liabilities over to the public ledger, and as shoes continue to drop (maybe commercial real estate, maybe muni defaults) that will continue to be the plan.
What’s more, in all of our moribund or backwards industries, from cars to health, the strategy is to increase government control.
As David Goldman recently put it, the situation is “No risk, no volatility, no economy.”
Or as we’d put it, the government has the economy in a sleeper hold. It hasn’t killed the economy, it’s just put it to bed. Everything is safe and quiet. As long as the government watches over the economy, it’ll make sure that we can sleep restfully, but with a pulse.
But if something happens to the government — if our foreign lenders get nervous about all this spending, with so little tax money coming in — then watch out. That’s the real last shoe to drop, because while we can always bail out California and the 600 local banks with souring commercial real estate loans, we can’t bail out ourselves.
(Photo courtesy of shtrng)