If policymakers succeed in containing the mortgage mess and bailing out financial crises, the recession may well end at the end of 2009 as massive fiscal stimulus begins to take hold, says Gary Shilling.

If not, it probably will extend well into 2010 and perhaps beyond.

The economist and investment advisor says four things need to happen in order for this recession to end: eliminating excess housing inventory, recapitalizing financial institutions, subsidizing mortgages for underwater homeowners, and bailing out bad loans altogether.

"For now at least, all that money from central banks and governments isn't getting outside financial institutions," Shilling writes in his latest Insight newsletter. "We're in a liquidity trap."

"The horse isn't drinking, thank you very much. And if lenders do start to lend, central bankers, with their congenital fear of inflation, will no doubt reel in all that extra credit."

Shilling sees a consumer "savings spree" coming, one that will increase the saving rate by an average of one percentage point per year for the next decade.

"That would generate a cumulative $5.5 trillion and go a long way to offsetting the intervening fiscal stimuli, and then some," Shilling says.

The bailout doesn't appear to have had much effect, says economic forecaster Donald Grimes.

"It's hard to see how things could have been a whole lot worse than they have been in the last couple months," Grimes told mlive.com.