Like their counterparts in Japan in the 1990s, American authorities may be deluding themselves into believing they can forestall the endgame of post-bubble adjustments. Government aid is being aimed, mistakenly, at maintaining unsustainably high rates of personal consumption. Yet that’s precisely what got the United States into this mess in the first place — pushing down the savings rate, fostering a huge trade deficit and stretching consumers to take on an untenable amount of debt.
A more effective strategy would be to try to tilt the economy away from consumption and toward exports and long-needed investments in infrastructure.
The bastardization of Keynesian economics by contemporary politicians is at the core of this problem. For some reason contemporary fiscal and monetary policy has taken the "lower interest rates / tax rebates or breaks" method to be the only way out of troublesome waters... Neglecting the concept of government backed infrastructure enhancements, which in the classical Keynesian school is a requirement of sound response to a slowing economy. I don't purport to be a devout Keynesian, but the current approach really stinks of being corrupted by the anti-tax crowd...
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