stockstradr have you ever heard the term “Employer of Last Resort”?

Your dramatic pictures of Second Great Depression unavoidably assume 20% or higher unemployment. But government always has the power to limit unemployment. This power is rarely used in the United States, because that entails deficit spending, expanded government involvement in the economy, and, generally, things that Republicans strongly dislike. Even if you can get Republicans to agree on deficit spending, they’d always prefer to do that through lower taxes rather than through direct job creation, which is obviously far less effective. And 6 out of 7 recent recessions took place under Republican president, Republican congress, or both. (The only exception was the 1980 recession, which was relatively short and ended around the same time when Carter lost the election to Reagan.)

This time we have a very liberal Democratic president, Democratic majority in the House, and we’re close to filibuster-proof Democratic majority in the Senate. So, this will be a very interesting and new experience. But a Second Great Depression it will be not. We will see bailouts galore, public works projects, low-to-no-interest loans given to municipal and state governments in an attempt to limit layoffs. We will more than likely see weakening dollar and strengthening export manufacturing. And that will continue till a) they succeed in turning the economy around or b) they fail and the Congress is replaced by a more fiscally conservative bunch in 2011.