Three Hurdles

You have three options... you can creep slowly into a deflationary depression that would last around 12-24 quarters, or you can stimulate the economy every time we fall near or below critical levels and suffer a great stagflation worse than the 1970's and possibly runaway inflation ending the reserve status of the dollar and virtually all of it's current value, or jump the three hurdles and attempt a real recovery without a depression or more multi-level stimulus plans.

Housing recovery:

Bank held real estate inventories too high to allow for real price discovery to find a bottom in many US sub-markets. Lending too tight to fuel any substantial speculative increase or boom in new or old construction. A higher personal savings rate and the shift to to paying down existing debt instead of taking on more. A small level of fear lurks in the real estate market and a high unemployment rate is clearly the anchor holding back any near term chance of a US housing recovery.


Unemployment:

There will be no real economic recovery without job growth. Corporations are holding trillions in cash and, in general, are currently not inclined to hire new employees whose costs are, due to public policy, very uncertain. Small business, which creates the great majority of all US jobs has seen little benefit from previous stimulus efforts and no organic economic recovery will be possible without strong small business growth.


Debt Crisis:

US Treasuries are currently too unattractive to keep rates relatively stable, the Federal Reserve must monetize the debt (recently up to 70%). Going forward, no matter what is said about the "end of QE2" the Fed will have to purchase a substantial portion of the debt for the US government to keep the lights on for foreseeable future. The US is currently taking funds from retirement accounts to make up the shortfall from exceeding the debt ceiling. I see no serious will in the politicians to reduce the US budget by enough to make a difference in our monetary trajectory's endpoint. The Keynesian strategy for recessions requires that interest rates remain stable and the budget deficits should be run to make up for the decrease in aggregate demand from the market. Unfortunately the debt issuance increases and cause the underlying fundamentals of the US treasury market to become more unstable. We are so far down the road of potential ruin, this one is technically very difficult to be positive or optimistic about.

There will be no organic US recovery before another collapse.