The consumer is not consuming. The consumer is 70% of GDP. The consumer is being crushed by high unemployment, high energy prices (often the precursor to a recession), and crushed under the financial and emotional weight of housing loans that are underwater and resetting, becoming even more expensive.
Things go in cycles, that have repeatable but not totally predictable time durations. Multiple cycles overlap over each other, with the prime cycle providing the big moves.
Trying to fight these cycles just end up wasting ammunition. The current administration appears to think that we can just erase cycles and make them go away. They are wasting ammunition (our tax money).
Volcker was the last "real" economist. He made the US take some bitter medicine, with high interest rates. Bernancke was selected because his playbook was well known and the powers that be knew that they would be able to predict and control this academic. They will suceed in blowing up the financial system and main street, and then their banker friends can buy up all of the assets in world on the cheap.
This is like some bad James Bond flick, except it is us living inside this broken clock.
http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html
A reader submitted a link to the picture below showing housing resets. I was also reading somewhere else that the reset rate was actually accelerating forward in time....i.e. the SIGTHTF sooner than expected. I will try to find that one.
The chart right below is from Credit Suisse and then further adapted by the famous King of the SSRs, Molecool of Evil Speculator.
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Insightful and Useful Comment!