Despite Optimism, Economies Are Still Looking for Stronger Fundamentals

While recent signals in the global economies offer some reasons for optimism, a closer look at the underlying factors reveals a tension between supply and demand that makes a W-shaped recovery an increasingly likely scenario. Limited credit availability and the cost of credit, which remains expensive, will be critical components of any recovery. Government-sponsored programs have helped prevent asset-backed securities from falling even further, but these programs do not provide a permanent solution. In fact, the efforts of the U.S. government to keep the economy going may result in the largest public debt and deficits since the Second World War.