In recent months, the dichotomy between booming financial markets, on theone hand, and sluggish economies and dysfunctional politics, on the other, hasloomed large. Yet insufficient attention is being devoted to a critical factor– time, and who controls it – that could well mean the difference between anorderly global resolution of today’s growing inconsistencies and a return to amore troubled phase.

Markets have been understandably buoyant in the first quarter of 2013.Most economic data confirm that, after the trauma caused by the globalfinancial crisis, the United States’ economy is healing, and doing so in anaccelerated fashion.

The sequence is now well established. It started with large multinationalcompanies, which are on as solid a financial footing as I can remember. Smallerfirms are gradually recuperating;banks have rebuilt their capital cushions and reduced their dubious assets; thehousing sector has stabilized; and a growing number of households arereestablishing healthier balance sheets, especially as employment graduallypicks up.

This private-sector recovery is helping government finances. The US budgetdeficit has been on a downward trend for now, helped by both higherrevenues and lower pressure on spending (for example, payments to theunemployed have fallen as joblessness has declined).

The healing process is also evident in Europe, though, unfortunately, itis effectively limited only to sovereign-bond markets. The real economy remainsunder enormous pressure in several countries, as economies contract andunemployment remains alarmingly high.

After flirting with disaster last July, interest-rate spreads for eurozonebonds have generally been subdued, andfinancial segmentation has been slowly reversed (that is, at least beforeEuropean officials embarkedon the controversial path of trying to impose losses on guaranteed bankdeposits in Cyprus). Moreover, as Ireland’s highly successful