How Did The 2011 Economy Go So Wrong?

When Jim O'Neill, Goldman Sachs's celebrated Asset Management director, dubbed 2011 "the year of the USA" two days before Christmas last year, his brand of optimism wasn't rogue. He was merely the loudest member of a growing crowd of market cheerleaders.

The poison and crud from the recession had finally worked its way through the economy, they said. Corporations were flush with cash and ready to hire. Financial institutions were swimming in profits and ready to lend. Housing prices had taken a beating, but that was a good thing in way. Homes were affordable again, and families who had spent two years shedding debt were itching to buy something big.

So how did 2011 turn out so poorly? Six months later, unemployment is still above 9%. Small business sentiment, which fell for the third consecutive month in May, is lower than a year ago. Real wage gains still look like a pancake, and the American Consumer -- the world's greatest engine of growth -- is showing up like LeBron James in the fourth quarter of a Finals game.