Panic Has Passed, but We Haven't Hit Bottom

The most panicky phase of the global financial crisis is likely over, thanks to the combined efforts of the world’s governments, writes Steven Pearlstein in the Washington Post. But don’t “confuse this moment of calm with a stock market bottom or a sign that a serious recession has been avoided.” The bear market is going to last until investors see signs that corporate profits are ready to rebound—which isn’t likely anytime soon.

We’re at the beginning of a transition period, in which we’ll go from spending 6%-7% more than we produce, to 2%-3% less. “We didn’t just have a housing bubble,” he explains, but a whole pile of bubbles that led to a “bubble economy,” overloaded with goods and unsustainable consumption. Now, that will all have to shrink down to size. Post-bubble recessions tend to be long ones, and “this was the mother of all bubbles.” (More recession stories.)