If the definition of “recovery” is that we have one quarter of GDP growth, how are we going to achieve that? It seems that current thinking is to use monetary policy (low interest rates and increase in money supply) to flood the credit market with cash. The problem I see with this is that the American consumer is already saturated with debt. Plus, this recession is the result of an unprecedented credit expansion lasting for almost the entire previous decade. In fact, didn’t this all start with the monetary policy that Greenspan introduced to address the last recession? We had GDP growth mainly because of the huge credit expasion (i.e. this country made money by selling each other houses.) What is going to take the place of credit to grow GDP?
I’m not professing to know a lot about economics – I don’t. But these are the questions that keep nagging me about how credit expansion is supposed to fix what credit expansion broke.
