When will this debt crisis end?

It’s understandable that it dominates nearly every debate on the news and also in culture at large, but when will this end? Oddly enough, it seems that we’ve exchanged one cultural legacy (The War On Terror) with the age of austerity or debt crisis.
How long will this last for, decades? The rest of my life? Will I ever be able to say to my grandkids one day ‘Oh that debt crisis era was awful, you don’t know how lucky you are etc etc’

You mean the sovereign debt crisis in Europe, or the US congressional belly-aching about the debt, or both? The first will end one way or another in a few months (though perhaps by giving rise to something worse), the second has been going on for most of my life and will no doubt continue until humans give up money after the Eugenics War.

My wild-assed guess - not until the United States develops a better political system. Or we develop a world government that manages to put some checks and balances on capitalism.

Let’s at least get our crises straight; the debt crisis isn’t a product of “Capitalism.” It’s a crisis of government. Governments have been sinking themselves financially with all manner of capitalist, socialist, mercantilist, and other economic systems since the beginning of history.

Bwah? So the European governments spending themselves into a giant hole is a failure of capitalism? And the U.S. government following the same path is a failure of capitalism?

The failure is one of responsible goverance, not capitalism.

The housing debacle might be considered a failure of capitalism except there was a bunch of government involvement as well.

There are a bunch of causes for the present mess. Trying to lay it all on capitalism is stupid and wrong.


Not so much a system ending, as the culture of this crisis ending. Like I said, it’s like we’ve swapped the War on Terror culture for this culture of debt and economic recession in a manner of speaking.

I don’t wanna be 40 or 50 and still have this crap play out.

These things are cyclical, helped by poor choices and overspending. In the good times we don’t see the drag of government waste, in the bad times it becomes a real problem, too late to solve.

In my younger years (the days of Carter) we went through the same hand wringing. “The world is ending”, “The gold standard will fix everything”, “The Japanese (now it’s the Chinese) are going to own everything.” Doom and gloom everywhere and every politician was certain he had the solution. Carter took the blame when the cycle turned down, Reagan got the credit when the cycle just happened to swing up.

I’m guessing whoever wins the next election is going to get to claim credit for fixing the economy, possibly it will be the 2016 election. Then it will be back to spending like a drunken Richy Rich again.

Real answer: There’s no way to know.

Prognosis based on history, expect good times and bad times for the foreseeable future.

Sheesh. The capitalism bashing from some quarters in the US is unbelievable. Try living under a socialist system. You don’t know how good you have it.

A bigger question to me isn’t so much when will it end but how will it end. Will tons of nations default and wipe their slates clean and wipe out investors? Will currencies be replaced? Will nations descend into civil war and mass disorder? Will the global financial industry need to be nationalized for a period of time? How it ends is going to play a role in when it ends.

Yep. The Scandanavians seem to be living in an iced over version of hell.

The capitalism bashing is understandable considering that stagnant wages and an irresponsible financial industry largely created this crisis (at least in the US). And now that it is starting most of the ‘sacrifice’ is being asked of us in the form of lower wages, fewer jobs, higher retirement ages, lower SS payments, less medicare coverage, less police protection, etc. Corporate profits have recovered and are doing great (again, in the US). But the public sector and the working class are suffering.

Simon Johnson wrote a good article in 2009 outlining what went wrong and what would happen.

Not all the debt crisis is an actual debt crisis. Spain, for instance, is in trouble, but

In 2008 Spain was running a budget surplus, which got wiped out by the recession, which was hardly their fault. They also had a housing bubble, like the rest of us. So let’s be careful when we blame the problem on government irresponsibility.

As for the US, the debt crisis is only a debt crisis because some people are freaking out about it. Interest rates tell us the markets don’t see it. The downgrade was not a result of debt, but rather of political irresponsibility. Our problem is more like that of a family where the parents refuse to take jobs offered them and then blame the kids for spending too much.

Unfortunately, Wesley, you also are just pointing fingers. The fact is that a hell of a lot of things went wrong. Govenment, banks, and many private individuals all did the same thing. They believed and created an asset price bubble, stretched it out, and made a huge mess, and this occurred across half the world.

Complete wag. USA perspective only.

I don’t consider it to be a debt crisis. Not even a recession, or tinges of a depression. Much worse. A fundamental fracturing of our economic system, exacerbated by ignorance and polarization of American society (in general - yes, wide brush), and a complete political breakdown (with one party totally self-absorbed in its ideology where compromise is essentially banned).

How long? At least a generation (i.e., more than 20 years). What may emerge will be nothing like we were before it began, nor what we are experiencing now.

It’s a cycle. There have always been periods of economic boom and bust. We have been extraordinarily fortunate in recent years to have had a fairly steady up trend, with only minor downturns. But it was inevitable that we would hit a bad stretch. I’ve known ever since I first started studying economics over 30 years ago that at some point in my lifetime there would be a serious recession/depression, I just didn’t know when it would hit. The good news is that neither side of the economic equation lasts forever. Ten years is a long time for a downturn, twenty is probably as bad as it gets. If I had to predict, I’d say we’re looking at a definite upswing by 2016. After that, look for another Roaring 20’s, when people will be talking about how we’ve solved the economic cycle problem, the stock market will never go down again, etc. Once people start thinking that the boom will never end, that’s when you should expect a crash.

I disagree entirely with those who say that this is fundamentally different from other economic crises. I do think there were a lot of mistakes made, by governments, the financial sector, and consumers/homeowners, but ultimately this is an economic problem that will sort itself out economically, no matter what the politicians do.

Scandinavia is not a Socialist set of countries. They are Capitalist. People have private property, can become wealthy, wages differ by profession, etc.

Sure, they are capitalist, but they are also socialist.

People receive basic needs like healthcare, education, retirement, etc. regardless of their relative success in the marketplace.

Social Democratic. However I’m often surprised by how Scandinavian nations in various ways are more purely capitalistic than the USA.

For the OP. In which way is the crisis a negative influence on your life that it deserves the name awful? Perhaps you are merely letting yourself be moved by news that has little to do with you personally. For instance, in Northern Europe a few people have been negatively effected by losing their jobs, many more are positively benefitted by lowering interest rates. Meaning they’re actually considerable richer today than before the crisis. And economic crises are often characterized by a much heightened level of innovation. I expect that is the case for this one as well, which will become evident in a few years time.

The Spain part is true but irrelevant, the bond market has doubts about whether Spain can pay its debt. This is debt that the government of Spain ran up and now must pay back. A nation with a growing economy can handle more debt than a nation with a moribund economy so comparisons with other countries do not matter so much.
Interest rates for Italy were 3.5% last year, now they are unsustainable. Every country’s government has a limit for the amount of revenue it can collect and the amount it can borrow. The problem is that no one knows the borrowing limit until it is too late so the wise thing to do not borrow more than is necessary.
The problem is that nations are finding out what General Motors found out. After the war the economy boomed and General Motors was making money hand over fist selling cars. They promised their workers great retirement benefits because they thought they would always be able to afford it. Unfortunately for them times changed and they were stuck with more in pension obligations than they could handle with their volume of sales. So they had to go bankrupt and unload the pension obligations.
Governments did a similar thing. They thought growth rates would continue like they had in the sixties and made lots of promises to voters. Those promises have proven to be unsustainable. The Neo-Liberalism of the eighties was able to stave off the reckoning. In the nineties the peace dividend and the internet bubble were able to keep things going. But the demographics kept getting worse as populations were aging and fewer workers were supporting more people. During the 2000s the housing bubble and the Euro masked the problem, but now the truth is out there for all to see. Governments have made too many promises for the level of economic growth and they are going to have to break their promise to someone. Either the pensioneers and government workers or the bondholders. The Euro will make things harder to fix and the fix more painful but the fundamental problem is too many promises and not enough money.

Where is this speculated ‘growth’ and market upswing going to come from if

A) There is a high level of private and government debt

B) An unwillingness for companies to part with their profits to invest


C) A lack of coordination and actual clear and strong leadership at the top, and this is evident from the lurching from crisis to crisis by political leaders always playing catch up to events.