Now, the collateral damage to real economy is going to be massive. Even if this Treasury rescue plan is going to be done right--and we're going to discuss it later on--I think the recession train has left the station. The recession started in Q1 of this year, it's going to continue at least until the middle of next year. The banking financial crisis train has left the station as well.
We are in a recession. We are in a financial and banking crisis. And if we're going to do everything right -- and that's a big if, so even if the Treasury plan is implemented properly, at this point we will have a severe, nasty, U-shaped recession is going to last two years and a financial and banking crisis that is going to last two years; and instead, if we don't do it right, we risk ending up like Japan in the '90s when, after the bursting of the real estate and equity bubble, there was an L-shaped recession that lasted something like 10 years.
So at this point it's going to be severe, regardless of -- the only thing we can do is try to minimize it and make it less severe than otherwise. But there is now a perverse interaction between the financial shocks hitting the real economy and the real economy contracting leading to greater credit losses and a further credit crunch. It's going to be a vicious circle. It's going to be very hard to stop this in the short term. (Laughter.)
True to form, Dr. Doom delivers the bad news, and what he has to say about the housing and banking markets is only worse and worse. The worst-case scenario for the US may not be a Depression like in the '30s, but a long stagnation ala Japan in the '90s. Either way, we're going to be hurting for a very long time.