Economics now enters a limbo period. The data flow that we get over the next few weeks relates to the period before the recent financial volatility. There is considerable uncertainty over how the real economy is affected by that volatility. The optimistic case is that larger banks do not tighten bank lending standards dramatically, and consumers carry on more or less as before. The pessimistic case is that lending standards tighten, consumers are forced to spend using only their falling real wages, and fear of unemployment constrains consumption further.
