Ignore what banking bosses say: the nice decade is most definitely past and the nasty decade is upon us, says the purveyor of gloom....
Banking bosses are trumpeting the notion that the worst is over. But for a realistic perspective on the current state of play, the best person to listen to is Paul Volcker.
The former chairman of the Federal Reserve, he who conquered inflation in the 1980s, is not optimistic. He said this week that Bernanke's interventions in the securities markets have opened the door to political interference that may threaten the Fed's independence.
This is not a good thing, when, as Volcker points out, we are also battling inflation. "If we lose confidence in the ability and the willingness of the Federal Reserve to deal with inflationary pressures and buttress the dollar, we will be in real trouble," he says.
But as Mervyn King pointed out this week, the real economy is in trouble already.
Official inflation statistics are no longer credible. With China, India and many others reporting inflation of 8.5%, claims that the US has 3.5% inflation and the UK 4% strain credulity. Around 7-8% is more accurate.
By opening the monetary spigots, Bernanke has guaranteed inflation. He is fast losing credibility and, with that, his independence. The US budget deficit is soaring and, with diminishing tax receipts, is on the cusp of an exponential takeoff.
Combined with the ongoing deleveraging in the shadow banking system, runaway inflation (or expectations thereof) will deal a heavy blow to the real economy. Against this, all day-to-day positive spin is just noise.
That the liquidity crunch persists is evident from the fact that spreads in interbank markets remain close to their peaks, despite central banks' most creative attempts at a solution.
What does this mean for anyone working in the banking industry? For many, deleveraging will mean years of litigation. AAA ratings for bond insurance companies and a whole host of derivative structures were blatant market abuse. All those complicit in the shadow banking world will be called upon to justify themselves.
The good news is that years of bonuses, if wisely invested, should now leave many bankers better placed to ride out the downturn than their real economy counterparts. A poll by the LA Times and Bloomberg suggests nearly 40% of Americans now think their financial position is insecure. This falls to 10% for anyone earning $100k or more. Nasty times are coming, but last year's financial cushion should help take the edge off for bankers.