The NGDP was well falling BEFORE Bear, AIG and Lehman. Those things happened because the central bank allowed a liquidity crush. Take a look at the numbers and you will see that it is true.

There might have been a slight recession even if monetary policy was on point but its hard to see one sector declining so much that it shows up as a recession in macro data. In smaller less diversified economy that can happen easier.

> The government did everything it could to lessen the impact (sadly pretty much guaranteeing the next bubble will happen sooner and be larger in the process) but a recession was inevitable because people couldn't keep on spending money they din't have.

That is just false. If you look at the data you will see that nominal GDP was dropping like crazy in 2008 and even at the end of 2008 the central bank had not changed policy.

In fact they refused to change policy for so long that they literally ran out of (or at least went to low level that they did not want to go below) that they were forced into easing.

You can see this very clearly in the data during 2008.

When people talk about 'they did everything they could' they usually refer to stuff that started to happen well after that QE2 and QE3 for example. The big mistake was made in 2008 and early 2009, the later monetary policy action just insured that NGDP would not flatten out completely (as it did in Eurozone).

> The Great Depression wouldn't have been as bad if economic stimulation had been applied earlier (although it may well turn out to have ended sooner, thanks to better targeted stimulation) but it couldn't have been avoided with better monetary policy.

Australia practically avoid it. Sweden and Israel did way better in the early years and this was because of monetary policy. Australia keeped up NGDP growth and thus they did not suffer a recession.

> Ultimately Central Bank policy is failing now because it doesn't have enough levers to restore balance to the economy. What lift we got in 2009 was from the automatic counter-cyclical kick of government spending that has largely petered out.

A central bank is job is not to find some mythical balance. A central bank job is targeting demand and the Fed does a sort of OK job at it.

The argument that fiscal policy was the determining factor simply holds no water. Changing in government spending have absolutely no predictable impact on overall demand. The Fiscal Cliff of 2013 was the best example, everybody who believes in these fiscal theory were predicting disasters even writing a open letter signed by many economics. Their predictions proved to be absolutely wrong.

The magnitude of automatic stabilizers is simply not large enough to account for massive swings in the macro economy. If you however look at NGDP relative to trend line you will see that those swings are in fact large enough.

> ps I didn't provide any story for 1926-29 boom so I have no idea what you're talking about there. You appear to be projecting.

I implied that there was a unsustainable boom between 1926-29 and that the mistakes were made there. That is simply incorrect and basically no economist today who believes in that story as a large contributor to the Great Depression.