To understand the present we have to understand the past. By understanding the present we are able to get better ideas of the future.
We seem to live in a mad time that reminds of a “house of cards”. The credit crunch back in 2008 was basically an issue of debt. The “solution” was to create more debt, manly through Quantitative easing (QE) by the Central Banks. The European Central Bank (ECB) has implemented a very aggressive QE-programs with negative interest rate and massive purchases of bonds.
The central banks has continued with their very aggressive monetary policy during the whole business cycle, as there was a crisis even during the boom. This is against all economical common sense, which students learn early when studying economy.
The cheap money floating around create problem with wrongly accumulation of resources. A consequences is that fixed assets like properties and equities has taken off. The steep increase in property prices has pushed up the rents and made it harder for people to by their first property.
Imbalances in the economy will sooner or later get corrected. It is therefore more important then ever to understand how the economy really works to be able to survive times of turbulence.
Rankia's interview with Martin Armstrong is well worth watching to get a better idea of how economy really works.
