The Japanese tried every trick in the Keynesian playbook. Zero interest rates, public works projects tax rebates and tax decreases. The government built thousands of bridges and roads, driving up government debt to enormous levels. Between 1990 and 2000, the Japanese government instituted 10 fiscal stimulus programs totaling $1 trillion. None of these programs worked. Sound familiar?....Dr. Benjamin Powell clearly explains:Japan's economy has been nearly stillborn for two decades now and it's likely our economy will be for a similar timespan.Japan created a structure of production that did not meet consumers’ particular demands. Producing things that nobody wants and propping up mal-investments cannot possibly help any economy. This policy is equivalent to the old Keynesian depression nostrum of paying people to dig holes and fill them. Neither policy will revive the economy because neither forces businesses to realign their structures of production to match consumer demands.
The stimulative package sort of reminds me of the surge in Iraq. I remember thinking the surge would work, but only as long as we had 100K troops over there. Similarly, the stimulative package - if done right - could stimulate the economy but to what end? As soon as the government quits pumping money into the economy won't it sink again? It's not as though people have a lot of money to spend and are just waiting for a feeling of confidence, it's that nobody has any money to spend because everyone is nearly up to their eyeballs in debt. Isn't the longterm solution to free people from debt so spending can resume? And won't that take, like, forever?
On the nat'l debt issue, I hadn't been worried about in the past because as a measurement against GNP (rather than GDP) it's much smaller than it was during WW2. So I don't know whether GDP or GNP is the important measure. Regarding median income may not be rising but it will never rise enough.
To play the blame game likely isn't all that helpful or even possible to figure out, but it seems as though Maestro Greenspan let us down. The one grown-up in Washington, he had the ears of the lawmakers and presidents. Place not your trust in princes as the bible says. Or you can simply say that free economies are supposed to boom and bust and without the busting you can't have a boom.
Greenspan was doing what most everyone does: exercising pain avoidance until the avoidance of pain causes causes major arterial damage:
"The crisis was caused by the Federal Reserve keeping interest rates low for too long, investment banks leveraging their balance sheets 40 to 1, banks marketing 120% loan to value mortgage loans on overpriced houses, consumers borrowing at obscene levels from their overpriced homes and credit card companies handing out credit cards like candy...".Didn't we know awhile know, deep down, that something was wrong? Didn't we know it by the way corporations became ridiculous in their efforts to please their quarterly Wall Street masters? How mergers and acquisitions were viewed as a magical, painless form of earnings growth? Didn't we know it when friends or relatives somehow ended up with 50K in credit card debt? Didn't we know it in the unnaturally long recession-less prosperity from '90 thru '01? Didn't we know it when houses suddenly became viewed as a source of money via refinancing instead of a place to, like, live?