All the folks who claim it's the Great Depression all over again are wrong: last time the spike was in the opposite direction. Here's the broader picture:
As you can see from the picture, what we're currently doing is exacerbating the symptoms of the current problem, as opposed to what they did last time, which was to look at the symptoms and say "Whoa -- we've gotta put a break on this!"Both, though are approaches to dealing with the primary symptom of the real problem: the overexpansion of money supply through loosening credit standards. There are a lot of dollars in circulation that only exist for real if you pretend their corresponding IOU's don't exist, just like the situation that occurred last century. In both cases, the result is a vastly increased number of dollars representing the same actual amount of national wealth. Thus each dollar represents much less wealth than it used to. But when credit increases like mad, people don't tend to keep their dollars -- they offload their dollars fast, converting them into assets instead. This is relatively OK if the assets themselves were paid for with cash, but when those assets were paid for with money that was itself purchased, that IOU sits out there demanding more cash to repay it. If the IOU is small, then it can be paid down and there's no big deal. If it's big, though, then when a hiccup hits the economy the demand for money suddenly outstrips the demand for assets, since the banks won't let us pay off our credit-cards by mailing them fancy sneakers. All the IOUs come home to roost and the money that people thought they had starts going "poof" -- suddenly cold hard cash looks much nicer than a shiny IPod and everyone starts taking money out of circulation if they can, or else they do the whole matter-antimatter thing and pay down their debts, destroying the illusion of wealth that wasn't really their in the first place (and in a real panic, selling the Lexus for $10k). This's the exact opposite of the "wheelbarrow of money" scenario of Weimar Germany and Zimbabwe, but just as bad.
Bernanke's attempting to snatch stagnation from the jaws of implosion by running the printing presses hard; maybe it'll work.
But in the long run, all those dollars will be coming out of our hides in the form of higher interest rates (to halt hyperinflation), vastly higher taxes (if we figure out how to borrow the money instead of print it), or some combination of the two. Regardless of how that plays out, we're dodging Scylla by stearing straight at Charibdis, so hang onto your hats, 'cuz the next decade's gonna get rough.
