Ballmer may get it, but I don't.

Steve Keen generally has an interesting perspective, but I don't understand where he comes up with the justification for his Ballmer Gets It post:

Ballmer's perceptive analysis of what is going on is:

"We're certainly in the midst of a once-in-a-lifetime set of economic conditions. The perspective I would bring is not one of recession. Rather, the economy is resetting to lower level of business and consumer spending based largely on the reduced leverage in economy," said Chief Executive Steve Ballmer during a conference call. For consumers, that may mean less discretionary income to spend on a second or third home computer, he said.

Bravo. That is precisely what is happening. It is also why, though government action might slow down the decline, ultimately it can't prevent a serious decline in economic activity.

So Balmer may get it, but I don't.  Why is it exactly that we need to reset to a lower level of economic activity?  Why don't we all just keep doing what we were doing yesterday?  Keep going to work and making stuff and swapping it for the stuff other people made?  Steve Keen has some interesting points in general-- he seems to be the Aussie cousin to Mish Shedlock -- and I am sympathetic to the idea that the change we are seeing now is not like an ordinary recession, but something more fundamental.  But I fail to understand how either of the remedies he proposes in order to bring our debt back in line with our productive capacity (inflation or debt restructuring) necessarily entails that we let our productive capacity fall.  Either of these factors are essentially just mechanisms for redistributing wealth ¿no?  If we don't pay off our mortgages, the guys who owned them will get less money ... and ... so then those guys will have fewer numbers after their name on the bank statement.  Remind me what the earth-shattering impact of this is going to be? 

I understand why debt deflation conspires to form a vicious circle if the financial economy continue to be coupled to the real in the same way as always.  But that circle becomes the collective madness of a nightmare we can awake from whenever we decide to if we are simply willing, for a moment, to suspend the rules of the game and move the chips around so that we can all start playing again.

I can understand that saying, in aggregate, "fuck you", to the Chinese will result in them not wanting to work so much for us and get paid only in IOU's.  Temporarily, this will mean that we will have to forgo some consumption to replace the production that they provided.  These factories won't get built overnight, and we won't be able to watch the TV's that come out of them till they are built.  So I accept some real hangover to the big party because we have dramatically mis-allocated our resources and built things like McMansions that don't help us build more things.  But for Christ sake let's quit whining and make some factories already.