The Austrian school is much more straightforward and capitalism based: if you must over-inflate be prepared to liquidate ferociously to shorten the recession. Hoover was incompetent and almost without needing to say, corrupt. FDR was able to play with socialist policies before he eventually decided and achieved war as his stimulus of choice. Neither is a shining light.

Oh and here's a heads up: we've been at war, against drugs, terror and carbon for some time. Real wars are no longer an option, as they will become too damaging to the interests of certain sectors. The Islamic business may become unstable, but the timetable is for more decades to pass. So steer straight ahead for deflation and remember to look surprized!

While it is true that our financial problem can be notably improved by going to war, it can also have exactly the opposite effect. If war mobilization results in us losing the war, or results in a long, drawn out war in which we have high expenses and low gains, the result may be a furthering of the depression. Not only is it possible that we may not gain valuable territory that we could use as a cushion, such as the american western frontier was used, should we lose, but even if we won, if there was a low death toll and a limited change in the distribution of wealth, there would not be improvement through a decrease of responsibility and unemployment. The only change that may occur is through the investments and jobs created by mobilization for war, and that could be created many other ways, such as jobs in public improvements or investments into research and development of new technologies. I, however, know nothing, so if you see a problem with my logic, inform me please.

"I think often of the great economist Dr. Kurt Richebacher. My analytical framework was over the years heavily influenced by his writings and mentoring. He would always say, “The only cure for a Bubble is to prevent it from developing.” Today’s crisis confirms the brilliance of Dr. Richebacher’s work. At the other end of the spectrum, conventional economic doctrine is revealed as shallow and fatefully flawed.

"I have repeatedly pointed to Milton Friedman’s analysis of the causes of the Great Depression as the keystone for our nation’s deeply flawed economic perspective. By the 1960s’, there was an eagerness to cast blame for the Depression on policy mistakes made in 1929 and subsequent to the crash. The depression, it was determined, was not due to any weaknesses or vulnerabilities associated with the Credit system and market pricing mechanisms. Instead, the 1920s were conveniently recast as the “golden age of Capitalism.” Over the years, Dr. Bernanke has repeatedly excoriated the “Bubble poppers” for their principal role in instigating the thirties downturn.

"Those of us who have studied the nature of the financial and economic maladjustments engendered during the rampant Credit excesses leading up to the ’29 crash take serious exception. Indeed, the Friedman/Bernanke/conventional view of that historical Bubble and bust has been a most dangerous case of historical revisionism and flawed analysis. I am more interested today in working to change failed economics than fingering blame for the crisis on our public servants working desperately to avert collapse."

Asset values have to return to that sustainable by reasonable debt-income ratios. So one side has to give.

The guy in the street thought that asset inflation was "trickle down economics" at work. It wasn't ...

But taxing Joe public's income is regressive and any asset stripping of the wealthy would have to surgically remove unproductive wealth and increase velocity without inflating.

My thoughts on how to do that are :

1. The numbers are too big (over valued assets with underwater borrowers) for governments to recapitalise the banks and to reflate.

2. Instead of talking loan principal adjustments, government should subsidise the interest payments of affected borrowers.

3. That new asset sale values would settle at nominally deflated levels with lending criteria normalised.

4. That the banks be liquidated (Mellon) followed by short term govt recapitalisation.

5. That such government interest subsidy and recapitalisation programme borrowings be financed by death duties.

And why Coffeeaddict won't they print me?

Thanks for the leg work. Put out to pasture this Moggs fellow.

Keynes was a shill liar, hired by the Political Elite to conjure up stories to justify political action.

Keynsianism is a fraud. The rank and file who believe in it are suckers and the dumb.

“The one favourable factor is that Governments are trying to reflate in a depression, whereas President Hoover deflated in a recession. At least that vital part of the Keynesian Revolution has become a normal element of official thinking.”

Paul Johnson in his “A History of the American People” came to this conclusion:

[Hoover's] “policy of public investments prevented necessary liquidations. The businesses he hoped thus to save either went bankrupt in the end, after fearful agonies, or were burdened throughout the 1930s by a crushing load of debt. Hoover undermined property rights by weakening the bankruptcy laws and encouraging states to halt auction-sales for debt, ban foreclosures, or impose debt moratoria. This in itself impeded the ability of banks to save themselves and maintain confidence. Hoover pushed federal credit into banks and bullied them into inflating, thus increasing the precariousness of their position” (p.619).

It is in fact an unfavourable factor, government intervention to prevent the eventual outcome, that is going to make the coming depression deeper than it needs to be.

“By this time [early 1933] Hoover’s frenzied intervention had prolonged the Depression into its fourth year...” (Johnson, p.620).

At least Doug Noland understands the reality, writing just before the present Dow Jones nominal peak:

"... the flawed view of the Fed's role in the Great Depression: If only the Fed had created $5bn and recapitalized the banking system. More money, so they believe, would have provided a ("mopping up") remedy for disastrous boom-time excesses. It wouldn't have worked.

"The issue then, as it is today, is not some finite amount of liquidity to keep the banks solvent and markets liquid, but instead the enormous ongoing Credit Creation and Intermediation necessary to sustain levitated asset prices, incomes, corporate earnings and government receipts" (Doug Noland, Money Market Issues, prudentbear.com, August 24, 2007).

The answer to today’s problem was the same in 1929. Andrew Mellon, Hoover’s Treasury Secretary, advise, quoted a number of times on this site, is still relevant:

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people”...

Proverbs 12:10 “...the tender mercies of the wicked are cruel”

It is going to happen whether we like it not, so why make it worse in trying to prevent it happening? Because very few understand the real lessons of the Great Depression. Ben Bernanke is not one of them.