Reply #3: I see another culprit

[orangeapple]

"So clearly the system has broken down because consumers can no longer buy stuff. Why? Wage stagnation over the past 30-40 years"

It's hard to gauge because of the interference of inflation, but I think you'll find it takes fewer man hours of labor to buy a refrigerator, TV, or even car. I don't think real wages have stagnated insomuch as patience has evaporated.

What I do think you can see is that America is way over leveraged. You can't continually buy new stuff on credit. Eventually the credit payments swamp your ability to continue funding a living standard you hadn't achieved. Then your living standard falls not merely to what your wages support, but what is necessary to pay for yesterday's living standard too.

Recessions are normally periods to work off excess debt and deleverage in order to be better positioned to grow (able to commit more income to investment/savings than debt servicing). We didn't really do that this last time around. The retrenchment in the private markets was small, in large part because the Fed stepped in and backstopped enormous debts that otherwise would have been liquidated.

Instead of burying the corpse corporations as capitalism would the interventionists spritzed perfume on them and told us that two years later there isn't really a stench.