Relativity

I open Google News today, and the economy is getting top billing all the way around. Housing data from December is coming in deadly, Bernanke continues to testify in favor of aggressive Federal Reserve interventions (it's a good read), and Obama is set to give us a "sober assessment" of the economy tonight.

Obama's Stimulus has just passed, which I suspect will mainly bailout the states; and a third round of mortgage revision attempts is in the works, with the prior two having completely failed—and the DJIA yesterday closed at 50% off peak. Citigroup and Bank of America are talking of being nationalized, and AIG is coming back for more bailouts still.

The problem, and the only reason why any of this is newsworthy, is that the peak of the bubble is regarded by politicians and maybe most Americans as the normal state of affairs. Once we shake that psychology, and regard economic events through 2006 as highly out of equilibrium and driven by the mother of all credit bubbles, we can all adapt to where this economy is going, adjust our expectations, write off what needs to be written off, and look forward again to prosperity once the correction is complete.