Another Depression or Political Fear Mongering?

Big media and elected politicians from both parties have been warning that a depression is iminent if a bailout of financial companies impaired by sub-prime toxic bonds is not passed soon. Actually, immediately! Day after day, these warnings were not obeyed by investors in the stock market. For one day, it looked like the populace was listening as the stock market lost 8% in one day when the House of Representatives defeated the bailout. But the market went up almost as strongly the next day as it had gone down. Clearly, it was a relief that the bailout was defeated as a very large majority of the public - cutting through both parties - is, and remains, firmly against any bailout. 

But what does the data actually show about the state of our economy?

The original estimate of GDP for the second quarter, 3.3% growth, was revised down to 2.8% growth on September 28th. A recession is defined as two consecutive quarters of negative growth. Current financial difficulties have been with us all year. Given the dramatic reduction in the price of crude oil and gasoline, is it likely that the third quarter GDP will be reported as a loss?

Strong consumer confidence underpins the GDP's suggestion of stable growth. It rose in August over July and came in at 70.3 in September versus 63 for August. This was the biggest monthly gain since January 2004. Consumers are said to make up roughly 80% of the economy. It doesn't look like they're searching for the nearest soup line.