Brad DeLong notes that the TED spread, a key indicator of banking system confidence, has returned to normal:
Unfortunately, while there was a long time when we were experiencing a financial panic combined with a fairly mild recession, for the past six months or so we’ve been in a severe contraction in the “real” economy. The financial system getting back to something approach normal is definitely a good thing, but it’s no longer clear that an end to the banking panic will lead to recovery. On the contrary, we’re to some extent now at a point where “real” problems are causing financial ones. After all, even a person with a very responsible mortgage or and little credit card debt is going to have trouble making his payments if he loses his job and spends 12 months unemployed.
Ordinarily, you’d be looking for an export-led recovery but there’s noplace to export to.