There may be a growing sense that because the stock market has enjoyed a nice bounce, credit spreads have come in and new issue activity has perked up, that somehow things are going to get better in the real economy. Not so fast. We may be out of the hurricane, but it’s still raining outside. The economy bottomed in the summer of 1932 but the Depression did not end for another nine years and as a reminder, by the end of that decade, after seven years of grandiose New Deal stimulus, the unemployment rate was still at 15%, consumer prices were deflating at a 2% rate and we still had yet to reach the pre-Depression peak in GDP.

Better does not mean good, and we must all brace ourselves for a much more frugal future. This does not mean the world falls apart. It means that lifestyles are going to change: frugality replaces frivolity, the family budget plan includes more savings for retirement and education, attitudes towards credit and discretionary spending shift, and owning the largest home on the block and the flashiest car is no longer going to be fashionable.