“I happened to listen to Alan Greenspan, during a question answer season in London few weeks ago, midnight California time, in which he said, “During early 1990s the money supply numbers stopped working [money supply was growing but banks were reluctant to lend]. We [Fed] put buckets of money out there [in the banks, similar to what the Fed is trying to do now] and it didn’t work. It was only after Wall Street came up with more [or newer] CDO products ["innovations" in securitization of debt] and took debt off the banks’ balance sheets that banks started to lend again and the economy began to respond.”

From: http://www.safehaven.com/article-9034.htm

This would suggest to me that the real / financial economy is a distinction without a difference no? If it took structured finance to gin up the economy of the 90s what makes anyone think the removal of this accelerator function will not have hugely negative effects?

Does construction count as part of the “real economy”? I remember reading not all that long ago that automobile manufacturing, repair, etc either directly or indirectly accounted for about 1/5 of all jobs. Since then it’s no doubt declined, but I would imagine that slack has been more than taken up by construction and affiliated businesses. And those have already been affected, and will eventually really be slammed.

And anytime you’re talking about a double digit (percentage-wise) part of the economy, that seems pretty ‘real’ to me.