The capital markets have recovered … or have they?
One year ago, pundits were talking about financial Armageddon as a real possibility. Nobody seemed to know exactly what “Armageddon” meant, and that’s partly what made it so frightening. The scenarios seemed almost unimaginable: What happens when the financial markets freeze up? What happens when banks stop lending money to their customers—or even to each other? What happens when stock prices plunge by one-third and every day brings news of another massive bankruptcy, from Lehman Brothers to General Motors?
Well, now we know what happens.
In short, life goes on. Yes, the new normal is less exuberant than the old one, but at least it’s not the real-life horror show we faced in late 2008. Banks are lending again and investors are buying corporate securities. A series of federal bailouts and stimulus measures have put America’s banks and auto manufacturers on life support. And while the economy remains in awful shape, the decline has slowed and overall confidence has returned to the global economy.