Three generations of economists immersed themselves in study of the Great Depression, determined to prevent a recurrence of the awful events of the 1930s. And as our current financial crisis began to unfold in 2008, policymakers did everything that those economists prescribed. Following John Maynard Keynes, President Bush and President Obama each offered a fiscal stimulus. The Federal Reserve maintained confidence in the financial system, increased the money supply, and lowered interest rates. The major industrial nations worked together, rather than at cross purposes as they had in the early 1930s.

In other words, the government tried to do everything right, but everything continues to go wrong.