By Brendan Loy

Are we experiencing a repeat of the 2008 financial crisis? The New York Times explores the question. It’s a good overview; I encourage you to read the whole thing. I am inclined to side with the pessimists, but I hope I’m wrong.

More broadly, I fear we’ll look back at 2010 as a “dead cat bounce” rather than a genuine (if weak) recovery between recessions, and likewise we’ll view 2011 through whenever not as a “double dip,” but as part two of an ongoing Great Recession/Depression that started in 2007 and has not yet truly ended, and won’t for a while. The structural flaws in the U.S. and global economies that were thrown into sharp relief in 2008 and 2009, then masked by frantic government efforts to prevent a depression, have not actually been solved, even if analysts and investors spent much of 2010 and early 2011 ignoring them and trying to forget about them. The housing market is still in deep doo-doo; global trade imbalances are still massive; we still don’t have a plan for replacing excessive, debt-fueled consumer spending as the “engine of the economy”; and we’ve simply shifted a lot of debt from companies to governments, so instead of too-big-to-fail banks threatening the stability of the economy, we have too-big-to-fail countries doing so, with no one left to backstop them or bail them out (and no political will for additional bailouts of any kind anyway).

Frankly, I never really understood the optimism of 2010 — it always seemed like the argument for pessimism was detailed and nuanced and well-thought-out, while the argument for optimism was basically “meh, we’ll muddle through, somehow or other.” But I partially supressed my doubts because I recognize my own lack of knowledge in this area, and have little choice but to trust the experts. Yet those experts made a lot of valid-seeming points back in 2008-09 about the depth of the problems broadly underlying the crash, and I’ve never really understood the logic of expecting a lasting recovery, even a weak one, before we make more progress toward solving those problems. To make a college football analogy (P.S. THREE WEEKS TILL KICKOFF!!! WHEE!!!), the “recovery” of 2010 felt like a situation where a team is widely and reasonably expected to struggle, because it lacks a proven QB or a solid defense, but then it pulls a somewhat flukey upset in its first game, and suddenly it’s deemed a national title contender… even though it still lacks a proven QB or a solid defense. The pessimists still have the better of the argument, and will probably be proven right in the end.

All the hand-wringing about corporations hoarding cash, holding onto their record profits instead of investing or hiring, misses the possibility that these companies are just more clear-eyed than the rest of us, and recognize what I increasingly suspect is true: that we’re in for a very rough decade, and building up a rainy-day fund (or a rainy-decade fund) before the s**t hits the fan — again — might not be such a bad idea. Again, I hope I’m wrong.