There are noted economists who maintain the so-called liquidity problem last fall was actually a crisis of confidence. Fear induced by the realization of the risks implanted throughout the system of securitized mortgages.

Granted, fear can, and did, lead to a real liquidity problem, but the credit crunch began in fear.

Today, there is no doubt that last fall the entire economy suffered a crisis in confidence. How could it not? How could we not?

Coming off last spring’s Bear Stearns debacle and the summer of bank failures, we endured a 12-day period in September during which the government took over Fannie Mae and Freddie Mac, Bank of America rescued Merrill Lynch, Lehman Brothers went bankrupt, the Fed printed $85 billion to keep mega-insurer AIG solvent, and Ben Bernanke and Henry Paulson screamed boo and slit their wrists in front of Congress.

After that, everything went to hell in a handbasket.

If you weren’t scared, you were on heavy medication — or should have been.

No less frightened were those who sit in our companies’ executive offices. Truth be told, they may have been more scared than the rest of us. Something about seeing the real numbers. And answering directly to a group of uncertain owners, called a board.

Scared bosses, or frightened boards, don’t create the best work environs.

Behind the charts and forecasts is a fear factor. CEOs will tell you, in private, layoffs feed off fear.

Its why you read that the ABC or XYZ company is laying off 10,000, instead of 7,596.

Rounded layoff numbers are guesses at best. And they are usually on the high side. No CEO wants to return to his board and admit he guessed wrong.

A chief executive who has laid off his share referred to this phenomenon as the layoff bandwagon. He told me that no CEO wants to look like a wimp to his board. So they jump on the bandwagon.

So what will entice CEOs off the bandwagon?

Profits.

As Dr. Robert A. Eisenbeis explained at the Leadership Atlanta Economic Summit last week: Profits will allow for investment in the business, which in turn will create jobs.

Unfortunately, that process is a ways off.

Eisenbeis, chief monetary economist at Cumberland Advisors and formerly director of research at the Atlanta Fed, sees no sign of a profit recovery in the just completed first quarter earnings season. And the second quarter, with the scuttling of auto dealerships, looks like a repeat.

This year is shaping up to be the third consecutive year of declining profits, after last year’s 10.1 percent fall vs. a decrease of 1.6 percent in 2007.

One is reminded of self-fulfilling prophecies and vicious cycles.

We’ve just about scared each other to death.

Thomas Oliver is a business columnist. He can be reached at toliver.writeright@gmail.com