Dean Baker makes a depressingly good case here that we are setting ourselves up for a second Great Depression. We forget that the Great Depression was a slow motion trainwreck, unfolding over two or three years of economic hardship before the final collapse in '32-'33. We have avoided many of the same mistakes of 1929-30 with TARP. We have avoided the Smoot-Hawley idiocy.
But - as with the Great Depression - we have adopted a premature orthodoxy on deficit spending and unemployment. As I stated below, demand has to come from somewhere, and as state and local governments slash spending (the 50 Little Hoovers syndrome) and the federal stimulus dries up, it should not surprise us that unemployment numbers are getting scary again.
Of course, once we default on the debt, we'll all be living a financial apocalyptic nightmare anyway, so whatever.
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