As we are talking of boats shooting over the edge, have a look at this eloquent – and scary – analysis of the current economic situation by John Mauldin.

It takes as its theme the subtle issue of Confidence, drawing on a new book This Time is Different, by Carmen M. Reinhart and Kenneth Rogoff:

This book looks at many different economic crises down the ages in all sorts of economies and tries to spot patterns. The conclusion for us now, according to Mauldin, is not comforting:

… the lesson is not a happy one. There are no good endings once you start down a deleveraging path. As I have been writing for several years, we now are faced with choosing from among several bad choices, some being worse than others. This Time is Different offers up some ideas as to which are the worst choices.

The heart of the matter is something elusive but real, called Confidence:

It is the nature of human beings to assume that the current trend will work out, that things can’t really be that bad. Look at the bond markets only a year and then just a few months before World War I. There was no sign of an impending war. Everyone "knew" that cooler heads would prevail…

… The point is that complacency almost always ends suddenly. You just don’t slide gradually into a crisis, over years. It happens! All of a sudden there is a trigger event, and it is August of 2008. And the evidence in the book is that things go along fine until there is that crisis of confidence.

There is no way to know when it will happen. There is no magic debt level, no magic drop in currencies, no percentage level of fiscal deficits, no single point where we can say "This is it." It is different in different crises…

Mauldin applies this Confidence concept to the grim problems of Greece and the Eurozone:

"There is no bailout problem," Monetary Affairs Commissioner Joaquin Almunia said today at the World Economic Forum’s annual meeting in Davos, Switzerland. "Greece will not default. In the euro area, default does not exist."

The evidence in This Time is Different is that default risk does in fact exist. You cannot keep borrowing past your income, whether as a family or a government, and not eventually go bankrupt.

Not to mention the USA too:

Obama offering to freeze spending by 17% in US discretionary-spending programs, after he ran them up over 20% in just one year, is laughable. Greece is an object lesson for the world, as Japan soon will be. You cannot cure too much debt with more debt.

But we sure are trying.

What? A roaring noise and clouds of spray ahead?

That’s odd. The canoe seems to be going faster…