It would work... In theory? Why did they bail out the banks?
Throwing money at a problem in some vague hope that it will resolve is almost as American as apple pie and baseball. Did Depression-era bailouts fail as a result of too-little-too-late, or does trickle-down economics sound as phony as it seems? Did our modern depression not escalate because of the bailout? Consumer spending creates the most revenue, and impact the most people, why not put money there? Why was America's most economically prosperous decades (1950's to 2000's) the ones were middle-class Americans had more wealth? Why did Bush liberally intervene with the economy?
Imagine unemployment rates of 50%. A world-wide depression. The collapse of all equity driven markets. That would be today's economy without the Federal bail-out of the F.D.I.C.
Wow, there is a lot there, but to begin with answering the question on why the banks were bailed out is simple -- Crony Capitalism which is really - Corporate Socialism. This bailout ensured the elite multinational corporations were protected which ensured that big money political donations continued to flow to elite politicians.
As for the depression, FDR New Deal progressive policies, based on Keynesian economic theory of government spending was worsened by these policies in 1937, which extended the time and deepened the affects of the economy. Economists at my alma mater UCLA, wrote a fantastic paper regarding the Great Depression. http://newsroom.ucla.edu/portal/ucla/FD … -5409.aspx
You are correct in asserting that the Great Recession and ensuing market crash and current economic stagnation/recession have been exacerbated by the bailouts. One reason is the elimination of moral hazard -- whereupon the companies that are deemed "critical" to the American economy are assumed to be going to be bailout by government regardless of the rish they engage in.
As for consumer spending, the reason that it consumes 70 percent of the economy is because the US no longer manufactures anything. Hence, in order to keep the economy growing consumers have had to shoulder the burden. This is an "unsustainable" economic theory, because consumer spending over the past 10 to 12 years was based on home values and 401k or investment capital. But, borrowing from these are finite. And now with real estate values down consumers cannot borrow in order to juice spending. Therefore, an economy built on consumer spending is an economy built to fail -- unless the eoconomy is a strong manufacturing, business and financial friendly economy.
Read the "Road To Surdom" by Friedrich Hayek it is a wonderful book to explain the issues you have raised. And it essentially answers the question as why America was prosperous -- which is because the United States was a free business friendly environment that welcomed individuals to build businesses that resulted in creating jobs and generating more industry.
As for Bush -- he is a Big Government progressive and not a conservative constitutionalist republican. Stated differently, Bush is a socialist not a conservative, which is why he intervened.
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