“The question becomes: What will the government do to try to stimulate the economy to stop the slide?”
I don’t think it matters what they try. They won’t have any more success than the Japanese did. The deflation is going to continue as unemployment feeds on itself. I think we are going to see a greatly different economy emerge after this process plays itself out, with a lowered standard of living for most of America in the next up cycle.
” I’ve come to learn that the Fed has stopped QE and never really injected much new money over the past 6 months. “
A funny thing about QE - I saw someone make a case for the idea that the past credit boom was built on QE, with China being the force responsible for the long term quantitative easing. China recycled their dollar earnings into American debt instruments, holding long term rates low and fueling the credit bubble. Not that they did this by design, they aren’t necessarily all that economically sophisticated. It was a very intriguing article but right now I don’t recall who wrote it.