"And, within a year or less, we can be on the path to recovery".That's hopeful and based on obvious policy optimism! The general policy prescription is the conventional wisdom but, in my view, there must be a certain amount of inevitable pain in deleveraging overextended economies. My question is how far to go in promoting expansion through further debt funded government spending. Hopefully not so far that we are left with an impoverished public and private sector. Partly this depends on Blanchard's assumption that things will be on the way to being hunky dory in a 'year or less'.
Apart from some inventory adjustment shenagins the US economy contracted by 5% in the December quarter. It will do worse than that in the March quarter. Given close to zero interest rates the key policy options do reduce to public expenditure and tax cut measures.