Back in the spring, the outlook was trending poorly for American consumers and for the U.S. economy generally. Since that time, particularly in the last few weeks, we’ve seen unprecendented levels of market decline due to global credit and banking issues. The situation has gotton worse. I am hearing that the speed of our decline may actually be a good thing. At the last meeting of the of the RFSC six months ago, Kermit Baker and other Harvard Joint Center experts opined that the quicker the economy gets to the bottom, the sooner that we’ll begin to see a turnaround. And, given all that has happened in the past six months, it is hard to image a quicker race to the bottom, economically speaking.

The key concept relates to consumer sentiment and market sentiment: If we think we are at bottom, only then can the market re-set and begin to climb again. Economist Robert J. Samuelson wrote about the same phenomenon in today’s Washington Post.

A dozen years ago, James Grant — one of the wisest commentators on Wall Street — wrote a book called “The Trouble With Prosperity.” Grant’s survey of financial history captured his crusty theory of economic predestination. If things seem splendid, they will get worse. Success inspires overconfidence and excess. If things seem dismal, they will get better. Crisis spawns opportunities and progress. Our triumphs and follies follow a rhythm that, though it can be influenced, cannot be repealed.

My theory, is that six months from now we will all look back and point to this period before the general election, with all of its unrelated financial turmoil and say that this was indeed the bottom from a purely market-sentiment perspective. Yes. there will be a continued fallout from what has happened: job losses etc. But every step forward from this period will be up instead of down. And by the 3d quarter next year, the current lack of certainty will disipate and remodeling will once again grow.