No quick end to credit crisis

A strange kind of euphoria marked the American media's discussion of the economic crisis over the past week or two. After the US stock market posted healthy gains for several consecutive days, breathless television commentators speculated that economic recovery may already be underway.

Meanwhile, the more sobre-minded members of the pundit class debated remarks by Christina Romer, the chair of President Barack Obama's Council of Economic Advisers, and Federal Reserve Board Chairman Ben Bernanke to the effect that the recession (or whatever we are now calling it) will end by December.

"I have every expectation, as do private forecasters, that we will bottom out this year and actually be growing again next year," Romer said on Sunday on national television.

Television, of course, is a medium with a short attention span, though, to be fair, the newspapers have not been a lot better of late.

Many of the reporters and commentators who now see light somewhere up ahead are the same people, who, a few weeks ago, were predicting a Dow below 4,000 by early summer.

Yes, the markets went up for a few days and, yes, a few big companies posted less-awful-than-expected quarterly results. But does that really mean things are markedly different today than they were, say, three weeks ago?

We all want to know when the economic pain is going to end. But it bears repeating that just as we did not get into this mess over the course of a month, it is going to take a long, long time to dig ourselves out.

Even more importantly, people need to remember that economic turning points are generally recognisable mostly in retrospect. Economists now pretty much agree that America's recession began in late 2007. At the time, however, this fact was not particularly obvious.

The Bush administration and its acolytes on the political right dismissed any talk of a downturn. They argued that everything was great and that anyone who said otherwise simply did not know what they were talking about.

John McCain's top economic adviser, former senator Phil Gramm (who was a university economics professor before entering politics), dismissed as 'whiners' ordinary Americans who dared to suggest that times were beginning to get tough.

Democrats offered more empathy, but outside of a few sectors (like the auto industry) where things have been very bad for a very long time, there was a tendency to fear problems ahead more than problems of the moment.

It was not until September when the housing and credit markets imploded and the Dow went over a cliff that many opinion makers were willing to acknowledge that something problematic might actually be going on.

Put another way, it took eight or 10 months for the country at large to recognise that we had fallen into recession. Coming out of this thing is going to work much the same way.

It is nice that the markets rallied a bit over the past two weeks. It might even mark the moment when the world economy, having hit bottom, began its long, slow climb back towards the daylight. But if that is the case, we probably will know so only in retrospect.

That also means that if Bernanke and Romer are right, and a real recovery begins late this year, it will only become clear sometime around August or September of 2010.

None of this lessens the pain many people in America and around the world now feel. Maintaining perspective however, will help people cope, and begin the lengthy process of rebuilding trust in the world's financial markets.

Just as many ordinary folks sensed that things were bad long before there was data to confirm it (or politicians willing to acknowledge it), so the recovery, when it comes, is likely to be slower to take hold in people's psyches.

Well into the 1980s, the old person who did not trust banks and kept his cash stuffed in a mattress was a fixture of novels, movies and television shows. As the bank failures of the early 1930s faded from living memory, that particular tidbit also disappeared from American popular culture.

The economy may recover in a few years, but it is going to take longer than that for average people - particularly today's 20- and 30-somethings - to regain their trust in the markets and the broader financial system.

It may be too much to ask (I worked in television for a long time and harbour few illusions on this score), but a bit more education and a bit less hyperbole from my friends and colleagues in the news media might be a good place to start.

We're all in this for the long haul. It would help if everyone acknowledged that.

Gordon Robison is a writer and commentator based in Burlington, Vermont. He has lived in and reported on the Middle East for two decades.