Reason has a very insightful article arguing very convincingly that private debt load is crippling economic recovery. Monetary stimulus will just encourage more borrowing, granting only a temporary reprieve, and fiscal stimulus is unlikely to have any ‘multiplier’ effect, as excess income will be used to de-leverage.
More ‘Chicago-style’ methods may have some effect, but even if we create a better business environment and increase production, a lot of that new productive force is going to have to pay off the debts of the past. We probably can’t avoid a painful correction, and we probably can’t regulate the culture into having lower time preference. We can discard government programs (mortgage interest deduction, I’m looking at you! Among others…) that encourage high time preference behaviors.