Weren't you the one earlier talking about how you couldn't get any loans from a bank... or maybe that was someone else.  There is plenty of demand for loans.

Regardless, most rich people don't put much money in banks, they invest it in other things that promise greater return rates.

That's where the government and deficit spending comes in

And when the government had been doing this already, and the economy still contracts, then what?  Isn't there a time when the bills come due?  Should the government just print money and give it to people, and not bother taxing anyone?

I have seen years of a game going on hwere the argument was to always cut taxes as a means of stimulating the economy.  Well then, after this, the economy slows down, and then more cuts were called for.  Tax cuts were called for in good times and bad times.  The deficit was said not to matter.  The federal debt before the recent fallout was heading towards $10 trillion dollars.  There is talk of the interest on the debt alone getting up to $2 trillion annually.  So, in this, how exactly is this paid for, and how does things like social security remain solvent?

The problem is the throddle has been pushed to the floor, even before this recent meltdown the past few years.  So, how exactly is this going to work?  I have been in the hope for a miracle situation, where spending was the answer, on a personal level.  You know where I ended up?  I ended up in bankruptcy.

Outside of people being allowed to fail and being removed from the marketplace, and failure being a purging mechanism, I fail to see how individuals working in corporations acting any smarter than those in government.  Is there something magic by saying it not being done by government that intrinsically makes things better?  Look at the comic strip Dilbert, and then answer how that is a sign of genius being in the private sector.  Scott Adams of Dilbert gets his material from people in the private sector at this point.  My personal experience in the private sector was that I had a manager tell me that the higher ups in the corporation made him be the Dilbert manager from time to time.

By the way, I said the above, knowing that the government is fairly horrible at doing anything.

I don't believe I said I couldn't get any loans.  I am not trying to get loans from a bank.  I definitely could use help coming up with a business plan so I can raise money to start a business, or help getting employment.

And yes, I am sure there is plent of demand for loans.  However, if the marketplace won't support new businesses, it is going to be hard to lend out money and expect it to return.  There is contracting going on, because there was a bunch of malconsumption and too much risk-taking going on in the market before the meltdown.  People maxed out credit cards and then used their homes as credit cards.  People bought stupid stuff, and there was too much expansion.

The problem now is that no one knows where the expansion is.  The U.S government privatized the Internet and turn that into a dotcom bubble.  Then they decide to create a bubble in housing, and it didn't work.  There is talk of green jobs.  But exactly where are those jobs?  And where is the money in it, unless there is heavy rigging of the economy and tax code, to try to factor in climate change?  That is the problem.  And look for a glut of workers to go into green jobs at this point, because it is a buzzword.  No guarantee green business will produce sufficient jobs.  If it is merely shifting of energy demand into new areas, then how does that add new jobs?  It doesn't.  It merely reallocates workers to new places.

I think people are underestimating the change going on, on here, and bringing out old answers.

It pretty much is as good as doing so during a deflation. Why would you give a loan during a deflation? Say you wanted to make a 2% return on your loan. The inflation rate is -5%, so the interest rate should be -3%, that is, you giving money to the person you loaned to. Will you do that?

Whereas if it was positive 5%, it'll be you demanding a 7% interest.

Also, you're an owner of a factory. You know that the number of orders you're going to get is going to go down. Will you buy new machinery (other than that to replace broken ones)?

Yes. You are correct.

The problem is that there have been periodic catastrophies in America (as well as around the world) for centuries. Since the invent of freer markets, we have indeed seen catastrophies.

However, that doesn't mean that very many, if any, require large amounts of government intervention via monetary infusions. For the most part, the government does more to harm businesses via regulations, incentives, and programs, than it ever has done to help them.

For example, there have been approximately 10 recessions in America since the end of WW2. How many of those did we see recoveries led by government spending? What about all the recessions prior to WW2? Periods of contraction are certainly nothing new. There was a recession just prior to the booming 20s, and as you read history...Plenty of periods of economic troubles.

However, we find that the vast, and I mean vast majority, were self-correcting. Yet we assume that, right now, the only answer is massive multi-trillion government spending on anything, hoping it works. As a tax payer...I have to ask...Did that $700 billion for the bank bailouts really help? Did all those bonuses I helped pay for really fix the economy? How about the stimulus spending - millions of dollars on State Route 23 in Circleville, Ohio which has mowed the grass and re-paved a road that was in pretty decent shape already...Did that help create permanant jobs?

Ultimately, we see government doing more harm to businesses during recessions, than doing a lot of good to help them. An example would be the dust bowl during the great depression - a drought that decimated millions of acres of land, killed many, and destroyed many businesses and jobs. Did you know the sole reason it occurred was due to over-farming? Did you know the overfarming was government-mandated, as a means to stimulate the economy?

We've had these debates for a long time at VGC. Ultimately, through all the research I've done, the best thing for governments to do is to usually stay out of matters, and let the bad businesses fail. Obviously, the government can help via regulatory reforms, making better climates for businesses (ala Reagan in the 80's). Unfortunately, many times, we don't want to admit that doing nothing may be the best practice. Herbert Hoover was a fantastic man - a spectacle to behold in terms of moral virtue. Yet despite that, his best intentions helped spur on the great depression... Much in the same way, we can see people like George Bush and Barak Obama pumping trillions into the economy, which really doesn't fix the problems - it just patches them up.

So loans at 0% interest would be unattractive in a -5% deflationary economy?