One of the more honest and insightful business columnists around, Steven Pearlstein writes this about our crisis:
A better way to think about the economic forecast is that we are at the beginning of a transition period in which our collective spending as a nation will go from roughly 6 or 7 percent more than what we produce to closer to 2 or 3 percent less than we produce, to accommodate an aging population and the need to put away some savings.
That's a huge swing, and although it won't necessarily come all at once and may be accomplished through different means, there is no way to accomplish this task by producing more. We're going to have to consume less, which means a temporary reduction in our standard of living.
Put another way, we didn't just have a housing bubble and a corporate takeover bubble and a consumer credit bubble and a commodities bubble. In time, those asset bubbles led to the creation of a bubble economy, with too many airplanes and restaurant seats and hotel rooms, too many office buildings and shopping centers, too many investment banks and media outlets dependent on advertising revenue from car companies producing too many cars and home builders producing too many houses. Shrinking all that back to the right size is what the coming recession is all about.