Bailouts, Debt Magnify Risk of Future Economic Troubles

Bailouts, Debt Magnify Risk of Future Economic Troubles

by Johan Norberg

The talk now is about "green shoots" and a "light at the end of the tunnel." Markets have rallied, housing prices have stopped falling, banks are profitable again, and it seems like we have been able to save several industrial giants that were on the ropes, like General Motors.

But we must never forget that the light at the end of the tunnel can be an approaching train.

All of these presumably positive signs could also be interpreted as problems. They might contribute to a slower rebound than expected, and possibly to a new crisis further down the road.

It is counterintuitive, but the fundamental economic problem was not the "bust"— it was the "boom," under which too much wealth was put to inefficient use.

- more at www.cato.org/pub_display.php?pub_id=10571