We're already in a "small-d" depression, although most politicos won't admit it, the question is "how deep will it be". I don't think we'll ever see another 1929 Great Depression because of regulatory safeguards, even as weak as they've become. The reason that this depression has come about is that newer pieces of the financial markets were basically unregulated, and the Fed's regulatory enforcement of the rest was intentionally lax going back through the Regan administration. I'm not saying it's a Republican thing; Democrats were every bit as much to blame and it's a problem with more than just Wall street & banking.

I think it has more to do with campaign finance and lobbying laws -- politicians owe too much to the people they're supposed to oversee, and high-level bureaucrats who the public depends on to enforce regulations know that if they "play nice" they'll be taken care of by their industry when they transition into the private sector. I recall "60-minutes" and "Frontline" episodes which highlight when somebody tries to enforce regulations, calls are made and they get shutdown -- money talks.

I don't know what the balance is, because I recognize that in order to be profitable, industries shouldn't be unreasonably burdened by regulations. However, I also recognize that most companies have no conscience on their balance sheet; incentives are set so that short-term gains outweigh long-term viability. The only incentive to worry about long term is legal liability, and they've been fairly successful lobbying for tort reform, so that they needn't worry about that as much as they used to. I think that there should be personal liability for wrongdoing assigned to the Chief Officers, Presidents, VPs, and Boards of Directors -- if their company acted irresponsibly, then they should be stripped of their personal fortunes to help pay for the damages. I'm getting a bit off track, and before I digress into proposing public burnings at the stake, I need to calm down...

Anyway, as I said, we are in a depression; Federal spending should help pull us out, but I expect to see increasing inflation, increasing interest rates, decreases in home values will probably be long term, and I can't even predict what the long-term effects of our ballooning Federal debt will be. States are in an even worse position because many of their constitutions will not allow them to have a debt, which limits their ability to provide services to help with increased unemployment (which decreases their tax revenues while increasing their spending). A recovery won't mean a return to the "hot economy" that we had for over a decade before this house of cards fell apart, and there will be more Federal regulations, if not an actual nationalization of at least some parts of the banking system. If we're really lucky, we'll also end up with a Federal government that's more interested in protecting the interests of citizens rather than of their campaign contributors.