What you're failing to notice is that those "Crappy games" are selling... What we're seeing now are Once great publishing houses (Midway, etc) that have too much overhead and outstanding debt to function in the low effort - high reward shovelware market.
That's not a sign that the market is failing, it's a sign that Some publishers aren't lean enough to hack it and they're going to falter as a result.
You can crap on Activision all you want because Tony Hawk: Ride was bad. But they made $550,000,000, in FIVE DAYS by releasing Modern Warfare 2. And don't think they aren't constantly raking in the World of Warcraft dollars... Most of what Activision puts out is garbage, but as long as projects mostly cover their costs, and the company as a whole doesn't put too much money on one horse, they'll be fine.
The bottom line is, it's a recession. Every industry is seeing large declines, (the average is something like 18%) and will this kill off some poorly structured developers/ absolutely, Is it a "Crash" or does it spell the doom of console gaming? Absolutely not.
Even if developers die, the Platforms will go on.