Yesterday’s consumer-confidence reading clearly indicates how afraid Americans are right now - both about the financial system and the economy. I'm not so sure, however, that they don't have their fears backwards at this point: While I hear a lot of chatter about the next problem in the financial food chain, I myself am much more concerned about jobs and the economy (as well as the future funding emergency) than I am about this phase of the financial crisis.

Next on Deck

I could be wrong, of course. But I think this phase of the financial turmoil is probably in its eighth inning, insofar as the government isn’t going to let any major entity (financial or otherwise) go bust at this juncture. While folks are worried about financial institutions, their real concern ought to be about the economy.

For several years now, as regular readers know, I’ve discussed my view regarding how weak the economic environment would be in my "next time down" scenario - when real estate, stocks, and the economy all fed on each other to the downside. Of course, I first proposed that idea before I saw the ultimate insanity that was our real-estate bubble/credit bubble.

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In the last expansion, economic growth was almost entirely about real estate. GDP growth, excluding mortgage-equity extraction, was almost nonexistent. In addition, when you consider that 30% to 40% of all jobs were real-estate-oriented, it's clear how hollow the economy was liable to be going forward.

Given the capital destruction and credit contraction now underway, I have a hard time seeing where new jobs will come from to handle all the layoffs that are going to take place. Additionally, given how wild consumer spending has been, there are lots of marginal businesses that are simply not going to make it, on top of all the carnage in anything related to real estate or finance.