In early 2007 how many Keynesian economists or commentators were forecasting the worst housing crisis since the Great Depression? How many were forecasting a major credit crunch and the wipeout of the financial sector? Not very many. By August 2007 the US government was following Keynesian/interventionist monetary policy, engaging in the first of an aggressive series of rate cuts to try to prop up the economy. Most other governments followed suit by 2008, even the ECB eventually joined in. Furthermore, from early 2008 a policy of intervening to prop up failed financial firms was followed. Now it's April 2009 and most of the world's major economies are committed to massive monetary and fiscal stimulus. And yet, so far the results have been absolutely atrocious. There are two possibilities for all this intervention, either it works or it fails. My question is very simple - at what point do proponents of intervention concede that they have failed? We all know that if the economy rebounds strongly in 2009 and 2010 that the interventionists will say "see? It worked". So, to be fair and balanced, what set of circumstances would show that intervention had failed? If 2009 is bad and 2010 sees no recovery either? In Japan they tried textbook Keynesian policies for 19 years in a row (since 1990) and the result was 2 decades of stagnation and wealth destruction, funded by debt that spiralled to well over 100% of GDP. Even the Keynesians admit that was a royal failure. So what about the West? If we see no strong recovery within the next year or two, will they also admit that the 2007-09 monetary and fiscal stimuli were also a failure? Will they admit the free market approach to the macro-economy was right?