There is an engineered recession in the offing with the US first place in the queue. They (everyone from the FED to the editors at the FT) are trying to sell it as a short six month respite. But though they may be masters of the universe it is going to take longer than that to coerce adjustment and work-off the overhang.
First housing (durables), now autos (semi durables) and eventually terminating in non-durables: this is the familiar pattern. And that cannot be achieved in 6 months. Given the new rules on bankruptcy in the US are matched with record levels of consumer credit and rising defaults it is going to take longer for the consumer to recover. Now add to that the eventuality of rising employment and stagnating wages as the recession sets in, and 6 months looks fanciful indeed.
The good news in all this is that it is the markets and those who operate them who are to blame. Unlike the last recession which was blamed on the fat welfare state and welfare queens that political dog is not going to hunt this time around. What about Globalization? They can’t blame free trade because there is an easy solution to that: managed trade. Well actually we have a managed trade regime right now but the question that dare not speak its name is “for whom is it managed?”
The bad news is that people rarely blame abstractions like the markets . Populist politics is most usually fought on the terrain of identifiable groups (minorities , immigrants) and institutions (Unions , the welfare state).
If I were part of the populist left my political holy trinity would be Financial institutions such as, central banks and consumer credit agencies, a delinquent regulatory state, and mainstream economists (mostly because people need more than institutions to blame and after all economists have been the central cheerleaders in all of this).