IF ONE ASSUMES that central banks, including ours, can revive confidence and get people to start spending more freely again (something I have my extreme doubts about re the near and intermediate term given the extreme employment crisis and incredible overcapacity that exists not only in the U.S., but the entire world, now - Japanese youth are protesting in the streets because of their job difficulties - and because the money being pumped into circulation is not reaching small businesses and consumers [and these entities still are not able to freely access loans] but is being used to limit losses, cover losses, backstop AIG-type guarantees, and recapitalize severely weakened bank balance sheets, etc.), then, at that moment, governments and big business will face a choice as to whether to ramp up production again which will only add to the supply of goods in the system, work against inventory workoffs, and put downward pressure on prices again. The establishment faces a Hobson's choice - either try to battle unemployment, that is severe and will become far worse than almost anyone possibly anticipates, IMO, and which will require government subsidizing businesses in ramping up production at severely underutilized facilities, which will pressure pricing and act as a deflationary force, or try to inflate prices, which will require continuing massive production cuts, and exacerbate unemployment. Can they balance these two objectives you ask (at least limit further job cuts and try to reflate prices, even modestly)? I doubt it.
Did you NOT see consumer confidence spike up to 57 (or whatever that manufactured number was) last month? Funny though, it's back down to 49 as of yesterday. Those damn consumers just can't make up their minds. I wonder how long GS was before last month's CC number. Alright, I'll quit. I know I'm getting OT.