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It is now four years since the onset of the recession and there are 6.6 million lesser jobs in America. The government thought that it was enough to save the banks as they would help to return the economy to where it was before. But that is not what happened. The situation we are facing now is as 80 years ago as then as now we are facing a breakdown of the banking system. The active work population has fallen by twice as in any post World War 2 downturn. The real economy is in a bad state and the problem of dislocations was never addressed. Eighty years ago the real economy stagnated because of increasing productivity in agriculture.It was only when government spending for the war increased that the nature of the economy changed again positively. Today we are moving from a manufacturing to a service economy whereby jobs are lost again because of higher productivity and globalization. The bubbles in housing and lending concealed the problem for while but the bubble has burst. The economy will not bounce back on its own and monetary policy is not going to help. Government should not try to preserve the old economy but fix the financial system and spend on education, basic research, innovation and a clean energy production.