Posted the following in the comments.
Wrong again O'President. This is the end of the beginning. We're going down much the same path as we took in the '30s. Japan did this as well in the '90s and they called the result the "Lost Decade".
This plan is unadulterated Keynesianism and can't work for much the same reason Socialism and Communism can't work. Socialism and Communism can't work because they do away with price signals when governments take over industries and without price signals you cannot have rational calculation in an economy.
Keynesianism fiddles with the price signals which also prevents rational calculation in the economy. Of course, by preventing rational calculation you ensure companies and industries getting into trouble and create the environment for government to take over the industries. So Keynesianism is a slippery slope towards Socialism which history has proven to be a failure.
Now, many say, "The last eight years prove that unfettered free markets are a failure." I ask you when the markets were free and unfettered in the last eight years. In fact, it was Keynesian manipulation of the markets and interest rates that got us into this situation.
It was the constant cutting of interest rates and the rampant inflation (inflation is an expansion of the money supply not the rise in prices that often results from inflation and has come to be called inflation) that caused the bubble. The bubble showed up in the housing market because the politicians coerced banks and mortgage companies to push home ownership to people who couldn't afford it. (Thank Acorn for their intensive lobbying efforts.)
The cutting of interest rates causes inflation because money is debt. This is important. Money Is Debt. In most cases, when the bank loans money it doesn't loan money it already has. The bank creates money in order to loan it. It actually loans money into existence. Lower interest rates encourage more borrowing. More borrowing means more money creation which means more inflation.
Well, interest rates are at 0 now. The fed can't cut rates anymore so the whole thing stalls, the bubble pops, money starts to vanish, there's not enough money to pay off the loans, people and companies start to go bankrupt, causing unemployment which causes more people to go bankrupt...
If we want out of this, and not to get back into this we need a monetary system that is not based on debt, where in order to loan or borrow money it must first be saved.
To that end, we need to end fractional reserve banking. This is the policy that allows a bank to create money from thin air.
We need to remove the Fed's and the Government's ability to manipulate interest rates. In fact, without fractional reserve banking there would be no need for a Federal Reserve Bank.
This is a fundamental change. For one thing, we would need a new money. Since the banks would no longer be able to loan money into existence we would need some mechanism to replace this money creation. The market has generally chosen gold if gold is available. Although our free market system should be allowed to choose what it will, I'd expect it to choose gold and or silver but there could be several competing currencies.
Servius
iamservius.blogspot.com
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