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A truly serious stimulus package is very much in order. It has to be big enough and last long enough that Americans do not just sock it away under the mattress. We cannot nickel-and-dime our way out of this. The inflation threat is small in an economy in full credit-collapse mode. There is virtually no dose of stimulus that is too much in an economy as shellshocked as today’s.

I don't agree with all Ben said in this article (particularly in the case of the Big 3 automakers), but I do agree with his general premise that there is enough fear in the market, worldwide, to lead to a very, very long and deep depression.

One maxim I think is true is that you cannot stimulate confidence. IOW, once a certain level of shock and fear is internalized, almost any amount of direct stimulus the government can accomplish is *felt* as nickle-and-diming.

To have gas prices drop to $1.50, or to get a check for $2,000 from the gubmint, just isn't going to take away the shock of seeing one's 401(k) lose 30, 40 or 50% of its value in a matter of weeks---and knowing darn well that it could take DECADES to get that back, if ever.

Moreover, this maybe-depression is very different from anything in the past because it encompasses very large moral hazards. At every turn of government intervention, there is the problem that the "fix" is rewarding the gamblers and deadbeats and those who played by the rules are getting slapped in the face.

If the "fix" undermines the market morality (e.g., that those who play by the rules generally win) by providing windfalls to those who gambled or punted, there will come a time when good and decent people will have no choice but to conclude that doing the "right thing" is no longer doing the "wise or financially survivable thing."

If that point is reached, we have a fundamental change that will be forever.

All that said, one of the approaches that might work, and might be amenable to schemes that don't reward the deadbeats, is MASSIVE TAX RELIEF for those who play by the rules.

For example, instead of mortgage bailouts to deadbeats, how about doubling or tripling the mortgage interest deduction for those paying their mortgage and living in their home?

How about a credit for credit card interest for those who are current on their bill for the entire tax year? That would reward the people who don't default and encourage spending.

How about loan modification for those who are current---to make monthly payments easier without the lender losing a dime, e.g., reamortization over 40 years?

How about stop giving a hiring preference to those on welfare and let people who were supporting themselves compete fairly for what jobs there are in this economy?

How about increasing the deduction for dependents for people who actually pay income taxes?

These are some examples of ways the government could "spend" money and give it to the people who can, by their good choices, keep this country afloat.