  The financial crisis of 2008, which started with an initially well-defined
epicenter focused on mortgage backed securities (MBS), has been cascading into
a global economic recession, whose increasing severity and uncertain duration
has led and is continuing to lead to massive losses and damage for billions of
people. Heavy central bank interventions and government spending programs have
been launched worldwide and especially in the USA and Europe, with the hope to
unfreeze credit and boltster consumption. Here, we present evidence and
articulate a general framework that allows one to diagnose the fundamental
cause of the unfolding financial and economic crisis: the accumulation of
several bubbles and their interplay and mutual reinforcement has led to an
illusion of a "perpetual money machine" allowing financial institutions to
extract wealth from an unsustainable artificial process. Taking stock of this
diagnostic, we conclude that many of the interventions to address the so-called
liquidity crisis and to encourage more consumption are ill-advised and even
dangerous, given that precautionary reserves were not accumulated in the "good
times" but that huge liabilities were. The most "interesting" present times
constitute unique opportunities but also great challenges, for which we offer a
few recommendations.
