The truth is that the crisis has hardly begun. Yes, there was a sudden and dramatic breakdown in a part of the finance sector after the collapse of the subprime bubble. But this was quickly and efficiently contained by the central banks. If you look at the stock market, it is still hovering eerily close to all-time high. It doesn't look like investors are dumping their shares in panic. There have been more amplitude than usual, but the overall trend is at worst a gentle slide. And house prices have not tumbled. Yes, locally they have. There are entire neighborhoods more or less getting shut down. But they are few and get a lot of publicity while young people looking for their first home still face the reality of artificially high prices. There is far more to go.
And that is the thing. There is far more to go. America in particular has built up a huge imbalance, financing consumption rather than investment with borrowed money. This will necessarily come home to roost, one way or another. I have predicted hard times ahead since the 1990es. Of course, people who predict the end of the world will sooner or later be right, but this is not quite it. Rather the recession of 2001 should have continued and deepened for a while, giving a Japan-like sideways slide for perhaps a decade. This did not happen. Instead, a rebound on borrowed money. Which is why I have become more pessimistic the longer the good times went on.
But it has barely even begun. Being back to the level of September 2007 is not exactly reason for impeachment, I think. If there is wailing and gnashing of teeth before there is even an official recession (two sequential quarters of GDP contraction), what will it sound like when the tide goes out?