As I was reading one of Mr. Hussman's recent weekly commentaries (linked below), it occurred to me that the couple of paragraphs I was reading (also below) could exactly sum up my own concerns with the, uh, recent "deep sigh of relief" which it appears the world is currently expressing.
Stock markets up; commodities prices up; interest rates up; risk-averse investments down. All these are things you'd expect to see from investors when a formerly free-falling economy has managed to grab some sort of foothold.
Hussman Funds: Anything But Academic (2009-06-01)
And here's the section which expresses my own thoughts far better than I could ever do myself:
...Presently, however, the debate about the long-term economic fallout from this defense of bank bondholders is anything but academic. I recognize that I have been on a virtual rant about it in recent months, but the reason is that it is literally the most important fiscal and bureaucratic event that we are likely to observe in our lifetimes, and is very possibly the precursor to enormous future economic difficulties. You simply cannot have an economy lend out trillions of dollars in bad debt, and then make the lenders whole with public funds (while still facing a massive second wave of probable mortgage defaults) without destructive repercussions. There is very little chance, in my view, that the current downturn is over. [Emphasis mine.] We have enjoyed a nice reprieve – if over a trillion dollars in redistribution could not accomplish even a reprieve, it would be a surprise. It's clear that investors are hopeful that we can simply return to rich valuations, debt-financed economic expansion, and abnormal profit margins based on excessive leverage. From my perspective, this hope is as thin as those that we observed at the peak of the internet bubble, the housing bubble, and the profit margin peak of 2007.
Yes. That's EXACTLY the way I'm seeing things. Not that it matters, of course, because I'm no macroeconomic genius.
Just what my gut's telling me...