Richard Posner says "depression"

One of the more enjoyable and stimulating blogs is by Nobel Laureate Gary Becker and Judge Richard Posner. The two scholars at the University of Chicago and they carry on a discussion on major topics. Both are brilliant.

Recently, they have been debating the efficacy of fiscal stimulus on infrastructure projects for combatting the downturn. Becker remains wary. Posner is more favorably disposed--for this reason:

I suspect that we have entered a depression. There is no widely agreed definition of the word, but I would define it as a steep reduction in output that causes or threatens to cause deflation and creates widespread public anxiety and a sense of crisis.

In another post, Posner says:

One objection to public-works spending as an anti-depression measure is that by the time work on the public projects actually begins, the depression will be over and all that remains will be the bill for the projects, in the form of an increased national debt, since public-works spending that is financed by taxes rather than borrowing has no effect on increasing demand for goods and services. What is given with one hand is taken away with the other. But construction projects, especially those interrupted or postponed because of the economic collapse, can be started up (or resumed) pretty quickly. Moreover, this depression (as I think it is, and not merely a recession) is likely to last at least two more years, and that should be time enough for much of the $90 billion (plus additional money allocated to construction) to be spent.

It's bad out there, and getting worse..

My suspicion is that nationalizing the banking system isn't far off. It may be the stroke the economy needs to start turning around the ominous combination of deflation and depression