LOS ANGELES - Yes. The recession is over. But a group of regional economists posed a new question on Tuesday.

Will the recovery last, or is another bubble forming - one that could pop next year?

Their answer was, a bubble could form - a "public bubble" - where unsustained government spending and intervention could lead to massive inflation and little correction to the economy's fundamental flaws, according to Los Angeles-Based Beacon Economics' quarterly economic forecast.

Essentially, their outlook was positive for this year and the early part of 2011.

"The recession has come to an end...from housing prices to labor markets," the report states.

Banks have loosened up lending. Financial markets have been "giddy," the report noted. But that's not the full story, said Brad Kemp, regional director of research for Beacon Economics.

Even as the region and the nation recover, fundamental tweaks to the economic system and consumer behavior have not emerged, setting the nation up for yet another popping bubble, he said.

Consumer spending remains at an all-time high as a percentage of personal income. Savings rates were an "illusion" based on tax cuts in the Bush and Obama administrations. And banks are still holding onto scores of underwater loans, the report said.

In one example, Kemp pointed to government intervention in the market as a double-edged sword. On one hand, it's helped prop up the economy.

But on the other hand, two consecutive private bubbles - the tech and the housing booms - have led to a new public bubble.

"It's all this money the government has put out into the market. It's increased the monetary base by 150 percent ....That money isn't making it onto Main Street. It's still in banks."

But because consumers are still voraciously seeking that money, instead of saving their money, when it starts to come into the market, the bubble will develop.

"It could drive people to grab after it, to create unrealistic growth, plus inflation," Kemp said.

That, coupled with massive government deficits, could lead to recession, economists said.

Ultimately, Beacon economists said that while the government's $787-billion stimulus program was a "necessary evil," it needs to be drawn down slowly.

"The one thing you can count on," the report says, "is that economic volatility will be the watchword for the next few years."