Less bang for America's stimulus buck

The aftermath involves resetting asset values, deleveraging, and rehabilitating balance sheets - resulting in today's higher saving rate, significant shortfall in domestic demand, and sharp uptick in unemployment.

So the most important question the US now faces is whether continued fiscal and monetary stimulus can, as some believe, help to right the economy. To be sure, at the height of the crisis, the combined effect of fiscal stimulus and massive monetary easing had a big impact in preventing a credit freeze and limiting the downward spiral in asset prices and real economic activity. But that period is over.