1. We have zombie banks.
2. There is considerable regulatory uncertainty in banking and finance.
3. There is a negative wealth effect from lower home and asset prices.
4. There is a big sectoral shift out of real estate, luxury goods, and debt-financed consumption.
5. Some of the automakers are finally meeting their end, or would meet their end without government aid.
6. Fear and uncertainty are high, in part because they should be high and in part because Bush and Paulson spooked everyone.
7. International factors are strongly negative.
8. There is a decline in aggregate demand, resulting from some mix of 1-7.
I have two simple points, First, a large fiscal stimulus addresses factor #8 but fares poorly in alleviating the other problems. Of course it may give a band-aid for #5 or #6 and you can tell other stories but we are in a multi-factor depression.
Second, forecasting will prove very difficult. These factors interacted with each other in a unique manner on the way down and they may well interact in an unpredictable manner on the way back up, whenever that comes. Just for a start, who has a good model of #1, #2, or #6? Right now we're seeing a lot of good faith efforts to develop forecasts, but I say don't believe any of them, whether they support your point of view or not.