http://www.minyanville.com/articles/obama-debt-bubble-1937-depression-credit-cash+for+clunkers-spending+freeze/index/a/26545
In 2003, Greenspan had a choice:
1. Take a hard recession now.
2. Take a depression later.
Greenspan chose the latter.
All stimulus did back then was create housing and debt bubbles. Then it crashed anyway. Now supposedly the cure is more spending?
This is what we face now: As soon as stimulus is taken away, the downslide begins. How many times can you pave a road or grant cash for clunkers? Eventually what little pent-up-demand there was is exhausted, and the stimulus ceases to have an effect.
This idea of Keynesian "priming the pump" has never worked and it never will. Japan and its national debt to the extent of 200% of GDP should be proof enough.
The only thing that can possibly work is the write off of bad debts -- something both the administration and the Fed are reluctant to do. We can either do this now, or drag it out for two decades like Japan, only to end up deeper in debt.
What ended the Great Depression -- and let's hope it doesn't come to that again -- was WWII and the destruction of capacity everywhere but the US.
