[Editor's Note: Taking a break from the doom and gloom of the economic downturn, venture capitalist William Quigley offers a more optimistic assessment of the current situation.]

It is hard to believe that just 8 years ago, venture capitalists were facing what we all thought would be the ‘great crash’ of our lifetimes. Meaning the one and only significant crash we would see before we retired. After all, even with two world wars, a cold war, and an unprecedented energy shock in the 1970’s, the 20th century only had one Great Depression. The Dow dropped 90% from its high during the Great Depression. NASDAQ dropped 80% from its high after the tech bubble burst. Market collapses of that order are only supposed to happen once in a lifetime. But now, due to the financial crisis of 2008, the consensus opinion among wall street and venture investors is that we are at the beginning of another great crash and long term economic malaise (note Sequoia’s amazing comment about a 15 year secular bear market).

If this were my first bubble bursting experience, I might buy into that dire consensus view. But it isn’t and I don’t. The figure that stays with me more than any other during these trying times is the performance of the Internet and hospitality sectors from 2002 to 2007. In the dark days of 2002, two years after the tech bubble collapsed and a year after the terrorist attacks, the hospitality sector was crushed (who wanted to fly) and many Internet stocks were trading near their cash balances. What happened? Over the next 5 years, Internet and hospitality stocks, which you could barely give away in 2002, were the #2 and #3 best performing sectors out of 75 tracked by the Wall Street Journal. The only better performing sector was coal - due to unprecedented growth in emerging market energy consumption.

When the tech bubble burst, lead by collapse of the Internet and telecom sectors, there was widespread believe that these were not ‘real businesses’. It was easy to see why people felt that way. Few Internet or telco executives were talking about cash flow and profits. Of course, the reason for this was that the public markets were not rewarding those things. Five years after the dot com crash, investors came to realize that in fact Internet and telco centric business models (think Google, RIMM) were among the most profitable businesses of our era. This lesson is now well known. What does that mean? I believe this time around the entire tech sector will not be abandoned. If anything, there will be more conviction around the best businesses and business ideas. This very same phenomenon is happening now in the banking sector. In the middle of the panic phase of the financial crisis, investors speak highly of BofA, JP Morgan, US Bankcorp.

We can’t deny that people are worried, even scared, about what is happening on Wall Street. Venture capitalists read the headlines and assume the worst. I believe the root cause of the deep anxiety being felt about the stock market and economy is the speed and severity with which it has taken hold. People have only so much capacity for dramatic change, especially when that change is negative. The pace of mortgage defaults and bank failures this year has been too much for most of us to keep up with. Images of a banana republic come to mind. But consider this point. Over half of all subprime mortgages originated in the trouble years of 2005-2007 have already been written off – to zero. Many of the remaining troubled loans are being worked out. The upshot? There is a historical wealth transfer taking place between global financial institutions and US home owners. Housing debt ratios for consumers will be cut by 40% when the write-offs and loan adjustments are complete. Consumer leverage will be close