The recent stock market run-up and the proclamations of many cheerful analysts is leading many to believe that the US economy is on the mend. Unemployment may not have begun falling yet and the US government is still up to its eyeballs in debt, but the faltering economy, so the argument goes, has turned the corner and the recession is all but dead.

Before we bury the coffin of what has been the worst economic downturn since the Great Depression, shouldn’t we pause to take a pulse? Did we really slay this monster or is it just gathering strength to strike again?

One of the key flaws in many discussions about whether or not the recession is over is a basic misunderstanding of what actually happened. To hear some people tell it, you might think a giant recession meteor randomly fell from the sky, blowing an unexpected hole in our otherwise thriving economy. In fact, we’ve been busy for the last three decades creating all the conditions necessary for the recession we have today. This isn’t something that just happened to us; we brought it on ourselves.

To see this requires a fact-based, rational and correct macroeconomic view that most people are missing – not just any macroeconomic view, but the right one. Thinking you have the correct macro view because you know that some subprime mortgage defaults kicked off a domino financial crisis around the world and now that mess is mostly over, is not quite as macro (or as correct) as you may think. There is actually a much bigger Big Picture here.

As we first pointed out in our book, America’s Bubble Economy (Wiley, 2006), the seemingly prosperous US economy is being held up by five co-linked economic bubbles that, while on the rise, help lift the economy in a virtuous upward spiral, and now on their way down, put the US economy at increasing risk in a vicious downward spiral. These economy-booming turned economy-busting bubbles include the: