A libertarian-economist-MBA's opinion on why we need government to deficit spend during this depression

Read entire article & comments at his blog.
Read entire article & comments at nakedcapitalism.com.
It's interesting comparing the comments due to somewhat different readership of each blog.

I totally agree with his take on the real problem. Think, houses being used as ATM's with home equity loans. Then value of homes collapse, re: collateral, with the same loans outstanding. The ones that aren't in default that is.:

But, make no mistake, the housing and writedown problems are only symptoms. The real problem is the debt – specifically an overly indebted private sector (note the phrase ‘private sector’ as I will return to this topic).

On why we're heading into a depression vs. a recession:

Depressions [are] marked by balance sheet compression[.]
Recessions are typically characterized by inventory cycles – 80% of the decline in GDP is typically due to the de-stocking in the manufacturing sector. Traditional policy stimulus almost always works to absorb the excess by stimulating domestic demand. Depressions often are marked by balance sheet compression and deleveraging: debt elimination, asset liquidation and rising savings rates. When the credit expansion reaches bubble proportions, the distance to the mean is longer and deeper. Unfortunately, as our former investment strategist Bob Farrell’s Rule #3 points out, excesses in one direction lead to excesses in the opposite direction.

He goes into what the public sector, ie: federal government:

If the private sector is a net saver, the public sector must, I repeat must, run a deficit. That’s the law of double entry book-keeping.

About the author.