You seem to understand the basic tenets of classical macroeconomics but are completely missing the boat when it comes to the psychological effect on liquidity. I'm sorry, but you sound more like a politician and less like an economist.
When investment exceeds intrinsic value and spending beyond what's recoverable, a bubble is created that has devastating effects on the psychology of both consumers and lenders, making the risk-loving to risk-averse in an abruptly short period. Until lenders feel (yes, feel) that they can extend credit safely, and when consumers feel like they can spend, then the economy is in recession.
Look at Japan. Their saving-heavy culture led to a recession that lasted more than a decade. It's clear that a climate that encourages investment but also consumption, and stable credit markets, are critical to a smoothly-running economy.
working
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