Five years on, the Great Recession is turning into a life sentence

Ambrose Evans-Pritchard telegraph.co.uk link via Free Republic

• Some date the crisis to August 9 2007, the day it became clear that Europe’s banks were up to their necks in US housing debt.
• For me, the defining moment was twelve days later when yields on 3-month US Treasury bills to crashed from 3.76pc to 2.55pc in just two hours. 
• The original trigger for the Great Recession has since faded into insignificance
• Yet the `Austrian School’ is surely right as well to argue that a rise in debt ratios across the rich world from 167pc of GDP to 314pc in just thirty years was bound to end badly.
• But why did the credit bubble happen in the first place? You could argue that it is merely the flip-side of too much saving.
• The credit bubble disguised the exorbitant imbalances in trade, capital flows, and incomes. The game could continue only as long as the West in general -- and the Anglosphere and Club Med in particular -- were willing to run ruinous current account deficits, borrowing themselves into dire trouble.
• Much of the debt will have to be written off. Whether this done by inflation (1945-1952) or default (1930-1934) will be the great political battle of this decade

ugh.