It is gonna take time

What comes after the Great Unwinding? By James Saft

...The bubble wasn't just in real estate, leaving the financial system holding the bag, the bubble was in consumption.

That is not to say that the current scrambling to save the system is pointless; there is a very big difference in the damage that will be done by a disorderly deleveraging compared with a slightly slower, more controlled one.

The banking crisis will have very serious negative effects on the real economy, and the cost will grow. This is true even if the ATM machines continue working, our deposits are safe and gold, bullets, canned goods and bottled water don't become 2008's best asset allocation choices.

The core of the issue isn't even solvency. It's the way in which the debt which is causing the banking insolvency distorted, distended and hollowed out economies around the world.

It caused a massive misallocation in the English speaking economies into property and into consumption that could only seem to make sense to people drunk on property price appreciation. It caused a less huge but still significant misallocation elsewhere....