Why the recession is not gonna be over anytime soon

[Tony_Parker]

@Avinash : On the other hand, anything that is tried today by the US to get out of the deflation (which could soon become a new Great Depression) was already tried in vain by the Japanese in the 90s to fight their own deflation.

Buying assets, building big projects, bailing out the banks, printing money, nationalizing... Nothing worked actually. The major theory today (see Bernanke) is the Japanese failed in the 90s because they injected money / built projects too late, but it doesn't seem that true. Japanese acted fast actually but it just didn't work, according to many historians.

It could very well mean that it's nearly impossible to get out of deflation quickly. The best way to fight deflation could be to avoid it altogether by making the asset bubbles unable to inflate to begin with. Every deflation was caused by the creation of huge asset bubbles (stock markets, commodities, home prices). The key here is probably to keep the fed rates high enough to avoid injecting money in those bubbles.

When put to zero enough time, rates create major misallocation of money in the economy (asset bubbles), because they allow 'cheap money' to be allocated in the same part of the economy, creating bubble

This fact and behavorial economics too (see Robert Shiller's work on that point, this man accurately predicted when the stock market would collapse in 2000 and when the home prices would collapse a few years later) are not widely acknowledged today by our governments.

Look at the rates in 2000 : zero. Look at the rates today : zero again. Every time we face difficult times, we slash the rates to zero, ignoring that even if it can help on the short term, it definitely spells trouble for future by building new asset bubbles that will in turn create new deflation...

So I agree mostly with the OP, the recession seems to me far from over. It won't probably be for many years either.