For some time now, we’ve been noting that the recently-concluded housing bubble wasn’t like most of the bubbles that preceded it. Unlike the railroad, telegraph, and dot-com bubbles–which, for all their short-term wreckage, created new infrastructure of immense economic value, as Daniel Gross argues in Pop!–the housing bubble has left behind virtual ghost towns, economically useless infrastructure (e.g., roads, water, and power leading to virtual ghost towns), and a brutal overhang of household and government indebtedness.
From the Telegraph on the ripple effects:
“It feels like the summer of 1931. The world’s two biggest financial institutions have had a heart attack. The global currency system is breaking down. The policy doctrines that got us into this mess are bankrupt. No world leader seems able to discern the problem, let alone forge a solution. The International Monetary Fund has abdicated into schizophrenia. . . . My view is that a dollar crash will be averted as it becomes clearer that contagion has spread worldwide. But we are now at the point of maximum danger.”