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Economy's in for Grueling Hangover

Time to pay for the party

By Matt Cantor, Newser Staff

Posted Sep 21, 2008 6:05 AM CDT

(Newser) – The federal government’s giant bailout plan sparked a stock market surge—but it’s unlikely the economic turbulence will end anytime soon, warns David Leonhardt in the New York Times. “It’s been a long period of excess” lasting over a decade, and now the dot-com, stock market and real estate bubbles are bursting, with others bound to follow. The "hangover" could last as long as the party, Leonhardt notes.

Wall Street is starting to pick up on its mistakes, he notes. But a major risk remains consumer spending, which has soared in the past 20 years, fueled by huge debt which is now ending. After a long period of consumer and investor optimism, the pendulum is likely to swing the other way, with serious consequences for the economy.

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A trader studies his phone as he works on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

Trader gets a bad feeling in the product options pit at the New York Mercantile Exchange last week. (AP Photo/Seth Wenig)

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A guiding principle of economic policy in recent years has been that nobody is smart enough to diagnose a bubble until it has already deflated. - David Leonhardt

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Economy's in for Grueling Hangover