More realistic economists think that we are simply in a debt trap where, due actually to past excess of liquidity and indebtedness, consumers, businesses and governments deleveraging is now compulsory. People and governments have to come to the not so shocking realization that you can’t get wealthy or retire by borrowing and spending or to have rising inequality letting future generations to pay your bills.
There is also another old fashion theory that we are in a crisis of overproduction, Marxist style. On the other hand because of the fetishistic character of capital production, the capitalist system in all its phases and in all its details may in a way be considered to be in a “permanent” condition of crisis. Yet, the key proposition of the Say's Law is that no matter how much people save, production is still a possibility as it is the prerequisite for the attainment of any additional goods of consumption.
I have not figured out myself exactly how this economy works, but I can tell you that it is not working well.
There is a lot written about the liquidity and consumption traps, both creating similar limits on the ability of fiscal policies to push up employment and production.
However I think it's not a matter of "consumption trap", perhaps technology-driven, but a model of society based on "consumption crap" and myths of efficiency. For years we have been buying things we do not need (that's the real consumption crap) with money we do not have. And yes, the people producing and selling us the things we do not need depend on the money we do not have.
To give you an example of "consumption crap" take smart phones and similar gadgets: do people really need them or supply is creating its own demand? Apart from few exceptions, most people just waste time or play games with them particularly during working hours...(pretending to communicate urgent or useful things...).
So should fiscal policies redistribute income just to let "poor" people to buy them? I am not sure about that. The same happened with cars in the past. We wanted to sell a car to every single inhabitant of the earth to discover afterward that we have traffic jams and polluted cities...
As long as we are convinced of, and by, a society that basically eats, sleeps, works and then veges out in front of a display either of PC, TV or smart phones, there is no future or alternative to the consumption and liquidity traps we are in. Most people do not seem to care. It's the economy, stupid.
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