to conclude, he does not know how to optimize a paid search account

He has a point, especially when it comes to that trust factor. But I think Al who commented here has a point too. There's a place for all marketing medium in a campaign, the trick is knowing how to balance them. PPC combined with SEO and other internet marketing tactics can prove very successful. You can't completely discount any one medium.

I disagree with Steve's points as well but I think the broader question has legs. The bigger question is whether the US will slip into recession resulting in a down turn in online advertising as part of a broader decrease in the overall ad spend in all mediums. I'm not an economist, nor American so I can't answer the question with absolute certainty, however the signs would indicate some serious underlying issues in the US Economy that are now being made worse by the credit squeeze following the sub-prime mortgage disaster. Basically: rainy days could easily be ahead :-)

If PPC costs ever drop, it will be because the businesses that throw money at PPC will have finally run out of money. Lot of industries are seeing inflated PPC costs because there are a few that are throwing buckets of money to get the top rankings, without regard to ROI.