A Path to Economic Recovery

Last week’s horrendous jobs report actually understates the nastiness of the recession. Along with the 533,000 jobs lost in November, the government nearly doubled previous job-loss estimates for September and October, bringing total losses thus far in 2008 close to the 2 million mark. In short, we are well into what is shaping up as the worst recession of the postwar era.

Depressingly, the downturn is accelerating despite more than a year of extremely aggressive remedial actions by the Federal Reserve and the Treasury, which together have pumped some $2.5 trillion of new liquidity into the financial system, with almost no visible result.

Why isn’t the reflation program more successful?