More Downside to Come Before 'Great Unraveling' Is Over

by: Michael Panzner

When you are afflicted with the tunnel vision (among other things) affecting so many of today's "experts," it's easy to misinterpret the relative calm of recent days as a sign that all is well.

However, to those who've been around a while and who really understand how things work, like the knowledgeable fellow interviewed by Yahoo! Finance Tech Ticker in "Todd Harrison: 'We Are in the Eye of the Storm,'" it's easy to see that there's lots more downside to come before the Great Unraveling is finally over:

"While the recent price action has been docile, I believe we're in the eye of the storm," Todd Harrison, CEO of Minyanville.com wrote yesterday. Todd joined me this morning to discuss why he thinks the current environment will prove to be "a relative calm between the first phase of the financial crisis and the cumulative comeuppance that'll flush -- and perhaps reset -- the system."

As with other pundits, most notably George Soros, Harrison says the subprime implosion of 2007-08 was merely "phase one" of the crisis. Since then, "historic efforts" by global policymakers temporarily revived the financial markets but didn't cure the underlying problems, he says.

Rather than providing "medicine that cures the financial disease" - debt destruction or restructuring and asset deflation - policymakers keep pushing "drugs that mask the symptoms," Harrison warns.

Citing the "cumulative imbalances" in the financial system (key word: "cumulative") and interconnectedness of the global economy, Harrison says the big question is: "How long can this continue before we're allowed to take free market medicine?"