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The End of the Crisis: Are We There Yet?


Looking ahead to the worrisome third leg of the downturn.

As the accompanying table from Bespoke makes clear, with 20% of the S&P 500 companies reporting, 2009 won't become the Great Depression II, as better-than-expected first-quarter 2009 earnings results support the better-than-the-bears-expected rally over the past month.

And this is before the full effects of the governmental stimulus programs kick in.

Therefore, it's advisable that investors try to get over their backward-looking fears of the global economic crisis, so that they can more clearly see where we are and, most importantly, where we're going.

For example, it wasn't the stock-market crash that brought about the Great Depression. It was the actions that followed (Smoot-Hawley Act; a Federal Reserve in monetary-restrain mode; the US Government obsessed with a balanced budget - pre-Keynesian thinking) that turned a terrible situation into a disaster. Every sane economist today acknowledges this, as does every sane public-policy official. Well, that's the case today, isn't it? And the actions taken by governments around this globalized world have followed the new playbook and pumped money into the system.

We can certainly argue the prudential nature of the specifics of our public-policy officials' decision-making, such as Geithner's quest to maintain the financial infrastructure of the US banking system. But what cannot be argued -- but shoud be, and is vigorously debated -- is the third part of the journey: What happens next? What happens after the economic stimulus has worked its way into the system? Will the economic hand-off from government to private enterprise take place?
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