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There was large scale government spending that was tried during the Great Depression, and many economists feel it worsened the depression... Some have said that this large spending (the new deal?) would have ended the great depression, had WW2 not done it for us...
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Speculation. Are you arguing that what is needed to
recover from a systemic collapse of confidence is the same as what is needed to
prevent a systemic collapse of confidence? You're an engineer, Karl, so you know the energy expended to make control corrections is small, if done early enough. Once things get moving in the wrong direction, it takes much more energy to set it right.
What we know for
certain is that there was a huge economic collapse starting around 1930. The US Government official took a "let the chips fall where they may" policy for several years, along with enacting protectionist tariffs. During this time, the situation got MUCH worse, bottoming out in around 1933. It dragged on for more years, and it didn't end until the war economy of WWII kicked in. These are facts.
The $700 billion TARP spending of October kept us from the falling into the chasm of banking system collapse. Nothing more.
I'm not happy with where some of that money went, and I hope we get most of it back. Nevertheless, I am convinced that we would all be much worse off if it hadn't been done. We've wasted that kind of money in Iraq without even a kick from the public. Why not spend it on saving our own butts?
We're all still on the edge of that chasm, and we can still go either way. The government is now trying to create a stimulus plan that will give borrowers and spenders enough confidence to take a step back from the brink.