According to Keynes, the root cause of an economic downturns is an insufficient aggregate demand. When the total demand for goods and services declines, businesses throughout the economy see their sales fall off. Lower sales induce firms to cut back production and to lay off workers. Rising unemployment and declining profits further depress demand, leading to a feedback loop with a very unhappy ending.
The economy’s output of goods and services is traditionally divided into four components: consumption, investment, net exports and government purchases. Any expansion in demand has to come from one of these four. But in each case, strong forces are working to keep spending down.
Drivers in the U.S. traveled 15 billion miles less in August, or 5.6%, which is about 770 million barrels of oil in reduced consumption.  The miles driven per month have been on a decline for many months.
Since March, the dollar has appreciated 19 percent, a move that will put a crimp in the export boom. 
The U.S. Treasury announced last week that is had invested $290 billion of the $350 billion that remained from the initial Tarp offering.
The Fed’s decision last week to start buying mortgage debt shows its willingness to act creatively. Between the Federal Reserve’s and the U.S. Treasury department’s new investments have been promised up to $7.6 trillion. Of the $7.6 trillion promised $3.7 trillion has been committed for spending. 
In normal times, a fall in consumption could be met by an increase in investment, which includes spending by businesses on plant and equipment and by households on new homes. But several factors are keeping investment spending at bay. One problem seems to be the dropping real estate values, which typically sees people waiting for the floor to be reached.
In 2003, William White and a colleague, Claudio Borio, attended the annual conference in Jackson Hole, where they argued that policymakers needed to take greater account of asset prices and credit expansion in setting interest rates, and that if a bubble appeared to be developing they ought to “lean against the wind”—raise rates. “Ben Bernanke really believes that it is impossible to lean against the wind on the way up and that it is possible to clean up the mess afterwards,” White said recently that, “Both of these propositions are unproven.”
Conditions are different under a credit expansion which first affects the loan market. In this case the inflationary effects are multiplied by the consequences of capital malinvestment and overconsumption. Ludwig von Mises, warning, “There is no means of avoiding the final collapse of a boom brought about by credit expansion.”
From the tools used today it is likely to be a long road before things get back on track. For everyone’s sake we hope that Chairman Bernanke was right and that it is possible to clean up the mess afterwards.