The market is reacting to over government action (deficit spending, too many cuts, overspending, encouragement to take on bad debt, Fannie and Freddie) and is reacting.

The world is out of money.  There is less demand then the infastructure in place to produce product.  Go back to Econ 101.  No demand no more need for supply.  

The choice is let the painful retraction happen, help those hurt the most and get through this.   The Keynesian solution is to print and borrow money that we don't have.  Where is that money going to come from?  The CBO is now saying it would actually hurt us in the long run.

So we hurt our economy in the long turn to do what?  Not create jobs in the short term?

Just becasue something is bad and terrible doesn't mean you ahve to do something.   We need to do nothing and adapt to the economic environment we've created for ourselves.  It will suck, people will be hurt but we will get through it to the other side.   Then we will invent something, discover something or create something that will get it moving again.

This stimulus and more goverment action (because this won't work) will simply put of the pain and as anyone upside down on their credit card debt will tell you that will result in bigger pain down the road.

Keynesian phylosophy believes that government economic thoery is somehow diferent then the same priciples that apply to us.  Because the big economy is so complex and so different it can take actions (stimulus, spending) to creat economic activity that will pump more money and demand into the economy.

This doesn't pass the smell test.  We can't make money out of thin air.  If we do we are either borrowing it from someone that already has it or we are printing it which doesn't create more wealth it simply devalues the money already in circulation.

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