By Daily Crux Editor Justin Brill:

Conventional wisdom says that we've officially averted the second Great Depression, thanks to the government's massive bailouts and the Federal Reserve's easy credit.

Thomas Palley, former chief economist of the US-China Economic and Security Review Commission, begs to differ.

Palley says we're just beginning the second phase of "deleveraging," and there's a very real possibility of entering a downward economic spiral.

He compares the economy to a car, where borrowing is like stepping on the gas pedal. The first phase of deleveraging is when borrowing slows and stops, which is like taking a foot off the gas. The car stops accelerating and begins to slow down. This is what we experienced in last year's financial crisis.

He says the next phase is where households begin to actively pay down debt and increase savings, which is like slamming a foot on the brake.

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