If Greenspan did not inflate credit for last few years, then the deflationary crash would have happened sooner. The total debt is too high. It will deflate. Inflation is the only game in town that the government has to make itself look good. When we borrow, banks create money out of thin air and they demand interest for it. They don't give out existing money.
http://www.tradingstocks.net/html/banks_create_money.html
New money makes it easier for people to earn it. People think government is doing a good job. Where as all they do is to borrow from the future. They went through prime borrowers. When there was no one left to borrow, they went through sub-prime. When that ran out the deflationary crash has started. It will be very hard to inflate it again at these debt levels. It will deflate until debt falls back to sustainable multiples of GDP. Here is the debt problem in the United States:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Much of the western world faces the same debt problem. Every year, to sustain GDP growth we have to borrow more and more. Exponentially more. That has stopped. We need a new housing bubble to increase debt. But home values and sales are down now. Even if we borrow to buy homes now, the new money that will be created will fall short of necessary levels. It is a dead end. FED is trying to make the crash smooth. There is no recovery what so ever. Otherwise they would be hiking the rates and pulling back the mortgage support. But that aint possible anymore. We are toast. Mistake was to inflate credit exponentially for the last 50 years. The cause is in place. Effect will follow:
http://www.tradingstocks.net/html/latest_opinion.html
Great Depression will pale compared to the coming crash.
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