How the U.S. got out of the last one might provide a clue:
US Census Bureau stats show the official unemployment rate was still 17.2 percent despite seven years of “stimulus”. Government was creating jobs but paying for it with taxing and borrowing, both of which comes from the very same economy it is trying to revive. The result was no net gain in overall employment. The nature of jobs simply changed from private to government.
Abandonment of Keynes inspired FDR policies “coincided” with the recovery of the 1940s.
The reduction of the federal budget from $98.4 billion in 1945 to $33 billion in 1948. Private sector production increased by almost one-third in 1946 alone, as private capital investment increased for the first time in 18 years. (from T. Di Lorenzo)
The bust is the way the economy adjust to the lower consumer demand, by liquidation of poor business positions and lowering of prices to market clearing levels. Government intervention only serves to delay the recovery.
