Excellent comment on some big themes. It’s how I intuitively view things but I don’t really have enough knowledge of the real world numbers and their rate of change to confidently articulate that.

Basically, a secular deleveraging with government intervention causing intermittent releveraging. The releveraging or even halt in deleveraging causing fake booms also plays well into Steve Keens theory on the role of the rate of change of debt on growth.

I also agree on the particular case of UK house prices, as I fail to see where the ability to increase leverage will come from given the sudden impact of a massive increase in debt burden that graduates are about to incur.

I agree with Edward that the economy will have a prolonged period of ups and downs but it will be false booms. These booms will suck in investors into assets that are still grossly overvalued. They will sustain losses over time. This period could go on for many years. In the Uk I think this period will be more than twenty years or even longer. The level of private debts in the UK is far too high and has barely begun deleveraging. It will take a long period of losses for investors to finally realise that they are hanging on to overvalued assets and exit markets, and for home owners to realise that they need to pay down debts. With stagnant wages and high inflation, the debt burden will increase even with low interest rates. Any “booms” will attract in suckers and then as they realise that real estate is overvalued they will exit. The ups and downs will be a result of either QE or fiscal stimulus being added or ending. This could look like Edwards W shaped oscillating economy, but will simply be the starting and stopping of government policy on top of my L shaped economy.

Long term real estate prices will collapse, even with money printing on a vast scale. Even if it stalls falls for a while. For the US rising property prices have only been boosted over the decades by a massive increase in worker participation and lower interest rates. Though these low interest rates are damaging other sectors of the economy. The fundamentals of many economies will deteriorate as a result of policy.

All the policy from the Troika will actually end up promoting extreme nationalism with extremist parties the main beneficiaries throughout Europe. If there is a return to dictatorships across Europe it could mean the end of the EU as well as it shrinks substantially. Any civil wars or revolutions that erupt will be the direct result of current German, ECB and IMF policy. Which could cause problems for Germany as its export markets erupt in flames, and refugees flood across its borders.

There is a solution but it is not even being considered. That is write off of as much debt so that Greece immediately no longer has a deficit. Then that would give Greece a lot more breathing space. Then the banks solvency should become the responsibility of the ECB. If this were done for Ireland much of its new debt liability would be transferred to the ECB and it too would be in surplus. Apply that to Spain and its solvency would no longer be at issue. Italy would also have less of a problem and it would have to undergo some structural changes such as caps on spending it would be much less problematic.
I agree with Edward that the economy will have a prolonged period of ups and downs but it will be false booms. These booms will suck in investors into assets that are still grossly overvalued. They will sustain losses over time. This period could go on for many years. In the Uk I think this period will be more than twenty years. The level of private debts in the UK is far too high and has barely begun deleveraging. It will take a long period of losses for investors to finally realise that they are hanging on to overvalued assets and exit markets, and for home owners to realise that they need to pay down debts. The “booms” will suck in suckers and then as they realise that real estate is overvalued they will exit. The ups and downs will be a result of either QE or fiscal stimulus being added or ending. This could look like Edwards W shaped oscillating economy, but will simply be the starting and stopping of government policy.

By this do you mean cause inflation or just counter deflation?

The mechanics and effectiveness of governments absorbing private sector deleveraging aren’t that clear to me.

Karatzaferis of LAOS who today quit from coalition government has spoken for the “german boot”.

Have in mind that Germans had also destroyed our economy during the nazi occupation (WW II).

Ed, I value your commentary and agree with your views generally but this is confusing to me.

What is the alternative to this?