There is "no reason" why the economy can't return to where it was 21 months ago in the summer of 2007, Forbes CEO Steve Forbes told attendees at JP Morgan Asset Management's 11th annual wealth management conference.

In the same way Alan Greenspan and Team Bush "blundered their way" into this mess, Bernanke and Team Obama "could blunder their way out," Forbes surprisingly said. The views of Forbes and other speakers at the meeting this week, May 4-6, provided the first opportunity I've had in a year to hear anything positive about the economy.

Taking sharp exception to conservative luminary and federal circuit court judge Richard Posner, Forbes blamed the 2008 tsunami on a "series of mistakes made by the government," and not on any intrinsic weakness in the free-market system. Posner, who is also a University of Chicago professor specializing in how law interacts with economics, recently penned a book calling for reforms in the banking system while arguing that the crisis reveals how a capitalist economy is not inherently stable.

Forbes laid the blame for the tsunami largely at the feet of two people: Greenspan and Hank Paulson. That's the same conclusion reached by Stanford University economics professor John Taylor, who served as Treasury undersecretary from 2001 to 2003 and also authored a book on the subject.

Spooked by the specter of Japanese-style deflation, Greenspan kept printing money into 2005. That sparked commodity inflation and injected an already bubbly real estate market with "steroids." Even so, Forbes said "what happened should have been absorbable."

Worried about not contributing to the crisis, the FASB introduced mark-to-market accounting, the SEC abolished the uptick rule and Fannie and Freddie kept congressmen in both parties living large on their payroll, Forbes duly noted. What he said about Hank Paulson would take too much room here, and besides, this is a family site. Just joking.

Now the big question is whether the credit market recovery will come fast enough to save a lot of small businesses. Agreeing with JP Morgan Asset Management's chief investment strategist David Kelly, Forbes declared, "The Fed is not creating explosive inflation." And he had high praise for Fed Chairman Ben Bernanke.

"When this is over, they need a strong and stable dollar. The weak dollar policy of the Bush administration was a disaster," Forbes observed. "They thought it would improve the trade deficit. It did, but look at the collateral damage."

Once the economy starts to recover, then the huge political and economic battles will begin.

Forbes warned attendees to watch out for Paul Volcker's commission on tax code simplification. He suspects the commission may recommend a value-added tax, V.A.T., which could start out small and might enable the Obama administration to keep the top marginal tax rates lower than most people expect. Forbes noted that a V.A.T. is a largely invisible stealth tax, so it can be raised whenever the government needs money. For example, Germany just raised its V.A.T. from 16.5% to 19%.

A small quiet V.A.T. might just give the Obama administration a platform to run on in 2012, namely that the country could use revenues from such a tax to fund universal free college education for everyone.