Looking ahead, since the current financial crisis and economic downturn are a process of correction of various imbalances that had accumulated over the past several years, the present severe situation will likely continue for some time.
But that audit trail narrative misses a large part of the story. A fuller answer must take into account the damaging effects the spending of the money had on prices and wages; on investment patterns and the productive structure of the economy; on the Government’s spending and tax rate decisions; and on the levels of indebtedness of households and firms.