Top White House economic aide Larry Summers gave a major policy speech at the Peterson Institute for International Economics today, but it had more to do with public relations than economics. The central message: WE DID IT! In other words, the U.S. economy has stepped back from the "abyss" of a second Great Depression, and we can thank President Obama's economic policies for turning the tide.

Summers' speech may mark the beginning of a major political struggle over who or what should get credit for an economic recovery, assuming that one gets under way later this year. Summers suggested that's what will happen, but Summers notwithstanding, it isn't necessarily clear that it will.

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Yesterday was one of those days where so many people on the Internet were wrong that I almost couldn't sleep because of it.

I'll restrain myself to just one example: Mark Gimein's defense of Goldman Sachs in The Big Money. (Disclosure: Newsweek and The Big Money are owned by The Washington Post Company.) 

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These last couple of days, my inbox has been filling up with news alerts announcing glistening second-quarter profits at the banks everyone loves to hate: $3.4 billion at Goldman Sachs, $2.7 billion at JP Morgan, $3.2 billion at BofA.

I like a good economic recovery as much as the next guy, but it seems a little too good to be true, doesn't it? Where's this money coming from? How are the banks doing so swell when they haven't come close to clearing out all the trash inventory that sank them in the first place?

Viral Acharya, a finance professor at the New York University Stern School of Business, has some thoughts:

A large number of banks borrowed government debt in October or November of last year. It basically allowed the banks to borrow at a low fee, so effectively the banks became riskless. Once they got the large capital injections, suddenly the issue of them failing in the short term was gone. The bank earnings now seem a lot rosier. I'm happy for the banks, but I'm cautious in saying that this does not necessarily mean that banks are back to being profitable.

There's more on TARP issues and profit-imitating trading strategies in the rest of Nancy Cook's interview with Acharya. It's an important read.

How can we predict the next bubble? That’s the $64,000 question, and while nobody has an answer, Goldman Sachs made some interesting observations in a research paper they put out this week entitled “The Twilight Zone.” This is what the bank is calling the most sensitive period in the economic cycle, the one that comes right between a boom and a bust.

Previously, economic cycles were basically thought to have just two parts─theoretical models that the rocket scientists in major banks use to try and forecast the future generally have a “boom” line and a “bust” line. But the Goldman paper posits another period─the Twilight Zone period─which generally lasts between a few months to a year. It’s during this tipping-point period that investors can find clues to the next bust.

But which of the many hundreds of commonly tracked economic figures should investors be looking at to predict the next crash? Probably whatever data point that was most important to supporting the boom in the first place. For example, the 1920s boom in America was supported by a credit expansion that led to a huge increase in consumer spending (sound familiar?). But several months before the stock market crash, factory outputs of things like cars had started to decline sharply─a sure sign that consumers had stopped spending, and black clouds were on the horizon.

The same thing goes for other crashes, like the Latin American debt crisis, in which capital flight began a year prior to the various sovereign defaults, and the Asian crisis, which investors might have foreseen had they been looking at the sharp fall in external reserves in Thailand (which had attracted some of the hot money fueling the region’s boom).

Of course, hindsight is 20/20. But this report serves as a reminder that where you see smoking hot assets, you may very well soon see fire.