The Great Recession is looking ever more like the Great Depression because -- surprise! -- it has more of a family resemblance to the banking crisis that underlay the Great Depression than the "typical" post-WWII recessions. These recessions were started by the Federal Reserve interest rate tightening to slow an overheated economy. This kind of slowdown can be reversed when interest rates are reduced which stimulates interest-sensitive purchases, especially house construction. But right now the Federal Reserve has interest rates at 0% and there is no house construction because the housing market is a no-man's land of underwater mortgages, bank repossessed houses, and scared home owners.
This Great Recession was caused by a housing bubble that created a financial panic which resulted in all the major banks becoming insolvent, i.e. bankrupt. The US federal government saved the banks with $700 billion in TARP money. But the bank panic caused a tightening of credit as banks reeled in lending to dress up their balance sheets and appear solvent. That credit tightening resulted in Main Street falling into a Great Recession. Loosening the money supply through low interest rates by the Federal Reserve is having no effect. Banks aren't lending. Businesses are hoarding cash.
The federal government which is supposed to use a Keynesian stimulus to kick start the economy has been ham-strung by Republican ideology that claims the only "stimulus" that counts are tax cuts for the rich and for business and a Democratic president who thinks "consensus" politics is the only proper way to "lead".
Tax cuts won't work. The rich don't spend and businesses are too scared to spend. So the two Bush tax cuts and the Obama tax cut in his "stimulus packge", have been wasted. And Barack Obama -- an otherwise smart man -- has been "advised" by a cabal of Wall Streeters (Larry Summers, Timothy Geithner, and Ben Bernanke) who were instrumental in creating the housing bubble and financial crisis. This cabal has convinced Obama that "whistling in the dark" is the most effective way to revive the economy. So far Obama has been through his favourite tunes but nothing seems to be working. He is a bit worried, but that Wall Street cabal has assured him that he only has to hit upon that "one special tune" and suddenly the economy will turn golden and the Democrats will win the November elections! Yes, you heard it here first. The Democrats will win in November because Obama, kind-hearted diligent do-gooder that he is, will keep trying until he hits on that one magical tune which will turn the economy around. Just you wait and see!
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