The crucial point to note is that all of this physical building activity was paid for physically as each and every project was produced, and was entirely paid for physically when it was completed and ready for ultimate purchase and use.  All of the discussion surrounding this calamitous financial event is discussed in purely financial, and never in fundamental physical terms—the assumption being, apparently, that the financial system is somehow a mere reflection of the physical aspects of the production system.  It seems never to be suspected that the financial system give a distorted reflection of the physical economy.  Abstractionism is elevated above reality.

Although the physical costs of all production are met and fully acquitted as production occurs, the financial costs of that production are not so liquidated and are carried further and further into the future as unliquidated debt charges against future, and unrelated, production.   Any interruption in the issue of additional credit for an ever-expanding program of production breaks the flow of debt repayment and leads to a series of bankruptcies and foreclosures upon real assets.  Of course when it is realized that and increasing number of debtors are having difficulty in, or will be incapable of, meeting their debt obligations, the issuers of credit become inclined to reduce or cease issuing new credits for new production and this exacerbates the problem by further contracting the supply of production credits and shrinking consumer income and demand.  Attempts by governments to stimulate the economy by further expansion of credit for production only worsen the situation because it generates not only new incomes but new costs as well—and so it does not have the desired effect of revivifying the economy.

The core problem is one of increasing financial illiquidity which cannot be rectified by issue additional cost-creating financial credits.  The error is in attempting to rectify the economic problem through attempts to stimulate new production when the actual problem is a lack of consuming power or effective buying power in the hands of consumers.  The goods have been produced but consumers have insufficient purchasing-power by which to purchase them. The problem can only be solved by the issue of new consumer credits which do not incur new costs upon issue but which are available to cancel previous costs.  The problem becomes aggravated as we replace human effort with automated technology and can only be resolved by ensuring that earned incomes are supplemented by non-earned incomes paid in respect of machine charges.  Machines incur costs but do not purchase ultimate consumer goods.  Only humans do this and they must have sufficient income in total to purchase the entire output of industry—not a shrinking part of it.

We have essentially solved the problem of scarcity through modern production but we have not learned how to distribute the entire product, allowing consumers full access to available consumer goods and making possible the liquidation of all business financial costs, simultaneously.

Sincerely
Wally