Two quotations from a story in The Washington Post on the financial crisis coming out of Dubai make it clear that, while the recession officially has ended, the economy remains very badly broken.
Quote 1:
“Dubai is very much a reminder that the lingering effects of the credit bubble are still with us,” said Barry Knapp, of U.S. equity investments at Barclays Capital. “While there no real direct linkages to U.S. markets and our direct exposure is small, we have plenty of our own bad debts in the U.S.”
Quote 2:
“The actual losses out of Dubai may be fairly limited, but it shows that we’re not out of the woods, yet,” said Rachel Ziemba, a senior analyst at Roubini Global Economics who tracks the Middle East. “We may be out of recession, but some of the underlying fundamentals that caused the credit crisis, those still remain.”
And this doesn’t take into account people who are unemployed or underemployed.
The reality is that we have done nothing to address the “underlying fundamentals” of a system that had come to resemble a casino rather than a functioning, productive economy. And even if we have several quarters of growth, it appears likely that we will continue to have high unemployment and be susceptible to the kind of market volatility we’ve been living with for the last 18 months.
