You should read Alan Blinder about "The Great Moderation" -- recessions since the late 1970s have been shorter and shallower than their predecessors. And far shorter and shallower than their counterparts under the gold standard in the 19th century. Also empirically, the reason the United States is doing better than Europe is because of the stimulus/bailout. It might be hard to think of the United States as a success story since it is only a relative one, but look at the much more dire situation in countries like Britain and Greece and Spain where governments were forced or choose to embrace austerity.

There is no reason the world cannot produce the same amount of goods as it was producing in 2007 - there are more rather than less people willing to work and the cost of borrowing money is very low. The only big outside constraint is energy costs, which are being offset by some fairly amazing reductions in the prices of alternative energy, including solar power.

So why the mess? The problem is a classic liquidity trap, a preference of investors for highly-liquid and safe assets that results in less money being spent in the private sector. This is visible in the way the borrowing rates of the Federal Government have fallen despite the best efforts of the Republican Party to drum up a debt scare the moment it fell from power and stopped spending the money itself.

Bailing out the banks did somewhat stabilize the banking system and probably prevented catastrophe. What remains necessary is getting out of the liquidity trap, which means increasing the amount of spending in the private sector. One way to do this would be having the government borrow at essentially zero cost and invest that money in public infrastructure projects which offer a return on investment. Another approach would be having the Federal Reserve declare an inflation target of 4% until the economic crisis is over. This would reduce the expected ROI from parking money in Treasuries and provide a greater incentive for firms to make private sector investments instead of just parking cash in the bank.