If there is a poem for this moment, it is surely W.B. Yeats' dark classic "The Second Coming." Written in 1919, it evokes the darkness and uncertainty of Europe in the aftermath of a horrific war. "Things fall apart; the centre cannot hold," Yeats writes. "Mere anarchy is loosed upon the world/... The best lack all conviction, while the worst/Are full of passionate intensity."
It's hard to imagine a more eloquent description of our own bearish age. The middle class is shrinking, the markets are flailing, U.S. presidential candidates are bickering, and European policymakers are fiddling while Rome (and Athens and London) burns. A global double-dip recession, implausible in spring, is now a distinct possibility come autumn. Most economists believe the U.S. GDP will grow a little less than 2% this year--and they are the optimists. JPMorgan pegs growth at 1.4%; it estimates that in 2012 the U.S. will grow 1.2% and Europe will contract an alarming 0.5%. Investment oracle George Soros frets that the debt problems emanating from Europe have the "potential to be a lot worse than Lehman Brothers." At the recent International Monetary Fund (IMF) meeting in Washington, policymakers from around the world were as anxious and shell-shocked as they have been since the financial crisis began in 2008.
No wonder. None of the economic rescue missions on either side of the Atlantic over the past three years--from the helicopter dumps of cash in the U.S. and the U.K. to the Germanic austerity plans being advanced in Greece, Italy and Spain--have managed to arrest the downward economic slide and consequent rise in unemployment in the rich world. The crisis is, of course, as much political as economic; in Washington, no one can move beyond small-bore, partisan debates over debt, while in Brussels, the E.U. capital, the political institutions needed to fix things don't even exist. The West, it seems, is out of ammo, ideas and leadership. In his 20 years of attending IMF meetings, said President Obama's former chief economic adviser Larry Summers, he had not been at one in which "matters have had more gravity."
You can almost smell the fear coming from the Federal Reserve. Despite a strident Republican accusation of "treason" for treating the Fed like a printing press, Chairman Ben Bernanke has moved forward with yet another round of monetary stimulus, this time buying up longer-term Treasury bonds in an effort to further drive down already low interest rates. The aim is that the resulting cheaper mortgage rates will stimulate housing sales and lift prices, which will help homeowners get out from being underwater on their existing loans. Operation Twist, its name a reference to the Fed's hope that it can twist the long-term shape of the bond-market yield curve, provoked only a shout from the markets. Stocks fell, the dollar rose, and consumer confidence remained as flat as ever.