You can’t (shouldn’t) fight gravity.

The damage to the economy was done in the boom. The bust is simply the market’s way of taking account of what was wasted. This process cannot be stopped, but it can be twisted from something healthy into something perverse, and Bernanke and Paulson are wringing the guts out of what is left of the US economy. What is even more perverse is that everyone except the Austrian School, who saw this coming (Rogers, Prechter, Mish, Schiff, Tice, Faber, Grant, Bonner, and Ron Paul, take a bow), keep crying out “More! Harder!”

Nobody who is worthy of debt wants a loan in this environment. Where can you invest the money to generate a positive return? The commercial paper market will continue to shrink as corporations scale down with layoffs and asset sales. The Fed can’t print up a renewed appetite for debt and risk.

“To believe, to obey, to combat”

So how will we eventually reflate? Government will spend the money into circulation, not lend it, as it takes over enormous sections of the economy, more on the scale of Mussolini’s programs than FDR’s. What little wealth and savings are left will be taxed and inflated away to support the Great Common Effort, until the Effort and War have hollowed out the nation unto utter collapse.

Poor America. It is clamoring for change, and as Mencken put it: “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”