If by spending, you mean giving money to the crooks from Wall Street, you are correct (Obama's current policy).

If by spending, you mean building affordable housing, rebuilding passenger rail, funding local farms, funding schools and libraries, funding free clinics, upgrading residential windows and insulation, etc., then spending in these areas will end a recession.

Not all spending is the same.

Correct. Deficit spending can be a useful tool under certain conditions, but its duration should be finite and it should only go towards productive activity.

flunkdaddy-you're absolutely right. The Keynesians always forget to mention the part about raising taxes, cutting spending and paying down debt when things get better. We've never done that (the 90's came close but we never paid down debt)and now we've reached the point where you sell the house, sell the car, hopefully get a small apartment, eat rice and beans and hope for the best. The next step would be the national equivalent of homelessness.

Unpleasant as it is, it seems better to get real about a problem rather than thinking everything will be OK if we just got rid of "those people" who cause all our problems. Pogo rules. ("We have met the enemy and he is us")

It is frightening to think what will happen when interest rates rise. And if they don't, how about all those retired people with nest eggs who suddenly have no income.

The very large problem with option C is that there are people who live in rural areas, such as my wife and myself, who cannot walk, take transit or bike to work. Out here there is no public transportation which can take my wife to her place of employment which is about 16 miles away. She cannot walk because the distance is too far and she cannot use a bicycle because it rains quite often here in the Pacific Northwest and also because she has Parkinsons' Disease.

Any more innovative ideas that you would like to throw our way?

Governments are't households any more than electrons are billiard balls. Completely different economic rules apply!

The only consequence of excessive deficit spending is inflation, but that hasn't been a probelm for a long time, and moderate inflation is a friend of the worker, becasue it puts hm in a better wage bargaining position, while lowering the real interest rate ( = intrest rate - inflation rate) on his household debt. This is why through the 1980s - 1990s the wealthy interests insist the fed raise interest rates at the least sign of inflationary pressure - in the form of "too low" an unemployment rate!

And if one considers inflation to be defined as an increase in the money supply, the "moderate" inflation spoken of here could be replaced by hyperinflation. For those not familiar with hyperinflation see: Germany 1923 hyperinflation.

Through most of history gold and silver was not worth anything except as money -- unless you were a jeweler, metal craftsman, or liked to wear or use such things. (Now we have discovered more uses for those metals). You can't eat gold, you can't saw wood with it, you can't burn it for heat, you can't even make a decent weapon of it -- it has very limited real uses: mostly it's pretty and doesn't rust. It's intrinsic values is fairly low; what mostly makes people want it is it's pretty, it holds up over time, and it's rare -- and because they think other people will give them useful stuff in exchange for it.

It is critical to be clear about the difference between the real and intrinisic values of things and the nominal value based on people's beliefs and expectations. ALL money is 'fake' in that it never has much intrinsic value unless it's made of something intrinsically valuable (useful) -- such as a good Nicholson file. Money has value ONLY because there are other people, and governments, who are assumed will back it. A government can default and demonitize currency, or it can be eaten away by inflation, but your good Nicholson file will always sharpen a shovel, even if you are the last man left alive on Earth.

The problem is that other people and the government have not maintained the associated real value of money -- you sure can't buy a good file for the same money you used to! But you can still trade that file for something of value if you find someone who needs it -- you can even sell an unused file you bought 50 years ago for more money than you paid for it. That file has as much potential productive work in it, as many sharpened shovels, as it ever did.

It's true that gold proce has gone up, but it's no more useful that it was in the past: it's the relative value of the money which has gone down. If the government maintained the ratio of real value to money's abstract, representational, value (no inflation), then we'de be OK, but that's destroyed by capitalism and bailouts to speculators who have lost their silly wagers but refuse to be responsible for them. The Fed creates money all out of proportion to realistic expectations for future production. It's debt like my telling you that for a hamburger today I will gladly pay you a millio dollars on Tuesday -- and there is no way I could possible even HAVE a million dollars on Tuesday -- I would be just lying to you -- I would be an INVESTMENT BANKER!

But if money were created with realistic expectations of future production, that that worls fine -- it's like the farmer who works so hard to plant seeds now because he can realisitically expect to get crops later in the year. Sound debt is about investing in the future , not stealing from it.