In today's Times, Bill Safire cautions us not to get too exuberant in what he sees as an amazing financial recovery for the nation, for fear of causing another bubble.
If the market keeps going up and the "wealth effect" further boosts consumer confidence, if economic figures continue to dance with Rosie Scenario, and if government mindlessly continues to stimulate with heavy domestic spending an economy that no longer needs stimulation — then all bets on the coming boom are off.
We could count on Chairman Greenspan to tighten money and resuscitate "irrational exuberance" if growth hormones race through the body politic. But as we saw in the 90's, that would not be enough to avert boom-and-bust.
Something Safire doesn't mention, but which has been a low murmer in the back of a lot of global economic discussion over the past two years, is the fall of the dollar as compared to the Euro. In today's London Guardian, Polly Tonybee observes,
Meanwhile, the euro soars to its highest level against a dollar sinking fast, due to Bush's deficits. Odd how the eurosceptic press that crowed at the euro's "weakness" now simply fails to report its steep rise. Significantly, business sees what's in the wind. The UPS Europe Business Monitor yesterday reported a majority of British businessmen now think the euro will displace the dollar as the main international currency reserve.
A majority of British businessmen, sitting in a nation which has refused to join the Euro, feels that way? Then perhaps Safire's concern should be something more than, "Will this deficit-driven 'recovery' last six months or two years?" Because an international shift to the Euro, driven by those same out-of-control deficits, will likely have a much more profound effect on our long-term economic future.