There are dozens of reasons I can pontificate why this will be a long recession/depression for America. But the single reason I keep focusing on is we have completely abandoned capitalism.
Capitalism, like evolution, helps weed out the weak and reward the strong. In this financial crisis, the weak are some very large institutions. If capitalism was allowed to work, those companies would be dissolved, hopefully in an orderly fashion by US backing, and the good parts of the businesses sold off to companies who remained strong.
Those strong companies, I presume where lead by better management, can put to work the resources acquired to grow their reliable business models.
INSTEAD what the US has done is had the large, poorly run financial institutions buy/merge with each other with US government backing. These companies to stay solvent are given billions either directly, or indirectly through discount borrowing. The management that ran their businesses poorly are given more assets to "manage".
Result? (Taken from Mish, click for his full spin)
J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.
The concentration of power to only FOUR corporations controlling 1/2 of mortgages. The future isn't hard to extrapolate. Assuming behavior continues, the 4 companies could turn into 3 or 2, and in reality 1, the US government.
When lending is centrally controlled through a government, that is called COMMUNISM, or BANANA REPUBLICS, definitely not capitalism. The common person is talking about how public health care is socializing America. Health care for next 10 years may be 2 trillion extra costs to the taxpayer. Doesn't everyone see the elephant in the room? YTD the US government has spend about 1.6trillion on programs, largely because of the financial industry.
This corruption and centralization of power will stifle innovation, business growth, and create an untrustworthy environment for private investment. All I can hope is the US changes direction and cleans up this mess by enforcement of law and order, but I will plan otherwise.