Economists assured them that everything comes up roses, if only they balance the federal budget. Reality is sending them back to school. To grasp the nature of this crisis, think of three separate deflationary currents surging around the world, viciously reinforcing each other. As economies shrink, the negative energy feeds back into financial markets. Once people no longer believe any pronouncements from experts, everything can freeze up.
Japan is a living example.
Fear and immobilizing pessimism lie at the core of any depression. The longer governments act hesitantly, the more often their forecasts of recovery are refuted by more bad news, the closer we are drawn to the full catastrophe. It would help public confidence if leaders started talking straight about the situation. Yes, some people will run out and dump stocks, but they seem to be getting the word anyway. Cut interest rates significantly, of course, but also prepare the political ground for a quick, emergency tax cut, not the usual regressive version but one that puts more money in paychecks of working folks who will spend it promptly.