Instead, it’s like the 1929-33 recession — or the recession of 1873-1879 — a slump brought on by the collapse of an investment and credit bubble. And monetary policy, at least in its conventional form, has already reached its limits.
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... and Hicks elaborated on this quite a lot.
What’s notable about this theory is that it made no use of the self-correcting mechanism expounded in every principles textbook, mine included — the mechanism in which falling prices lead to a rising real money supply, which shifts the aggregate demand curve out. Why? Well, as we’ve now learned the hard way, a sufficiently severe bubble-bursting pushes you into the liquidity trap, and makes the aggregate demand curve more or less vertical.
Instead, recovery comes because low investment eventually produces a backlog of desired capital stock, through use, delay, and obsolescence. And eventually this leads to an investment recovery, which is self-reinforcing.
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As autos go, so goes the capital stock. In the long run, we will have a spontaneous economic recovery, even if all current policy initiatives fail. On the other hand, in the long run …
So, is the Obama's "Kiss" written off completely? No! He writes: "... if all current initiatives fail."
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