How do you stem a recession?

It all really depends on what the causes of the recession are.

Our current recession is more the result of previous excess... it is more of a return to a managable consumption level at both the consumer, business and eventually (ha!) government level. We have spent, at all levels what we dont have, and the issue will not be resolved until spending and heaven forbid savings can be supported by income.

To inject further additional borrowing and spending into this cycle simply will drag out the inevitable deflating and deleveraging of the economy. The only cure is for the inevitable contraction to take place and in my opinion, the sooner we let that happen the better.

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How do you stem a recession?

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How do you stem a hurricane? We just have to let this play out. Nearly everyone in the global economy was basing their business models on incorrect assumptions primarily because the housing market was improperly priced. We weren't as rich as we thought we were which means we'll need fewer TV's, buy cars less often, etc. Once we hit bottom we can pick up and start growing again. That is the nature of business and no matter what the politicians tell you, we can't avoid the pain anymore than we can give back the artificial highs we had.

Apparently the Fed doesen't know the answer to your question.

'A cat fight at the Fed'
Wednesday, January 14, 2009
'Apparently they're not all singing from the same hymn book these days over at the Federal Reserve as Philly Fed President Charles Plosser has broken ranks with Fed Chief Ben Bernanke on how the central bank is using its massive balance sheet in what appears to be a never-ending attempt to save the world.

At this point, with things as bad as they've gotten, you have to stop and wonder, "Would it really be any worse if, from August of 2007 on, the Fed and the Treasury Department had done nothing?"'

Plosser, in a speach Tuesday, was very critical of current Fed actions...The plot thickens...

LINK