The Faustian Bargain and the Great Recession

Over to Buttonwood, who says "now the devil is claiming his price":

We have set up economies where we have demanded "middle class welfare" (the tax deductibility of mortgage interest is an American example, cheap university tuition is a British one) along with rising house and share prices. To get the latter, governments liberalised the financial markets. This allowed us to borrow money to buy houses and allowed banks to expand from plain vanilla lending into the securities markets. We had welfare states without the pain; we ran trade deficits without suffering the kind of constraints we would have faced with a gold standard.