TPI is right, the article written for dailykos by billmon is worth a read, mostly to save me the effort of summarizing it.
But the problem I see that he is not addressing is that if the government successfully absorbs the debt of the nation like a charcoal filter so that the economy doesn't collapse then nobody learns their lesson.
I am quite sure the Depression was a terrible, terrible time. I have no idea, I was born 40 years after it ended. I, in no way, endorse economic collapse. But if we use the government as a credit absorber, and soak up the insolvent banks, and soak up bankruptcies and personal credit defaults, if we buy mortgages, if we buy large stakes in Citi for half again what the stock value was (netting the company a tidy profit of $23 billion), then we are not letting individual Americans, one by one, learn the terrible lesson that my grandfather learned, which taught him to live his entire life frugally, to own only one home from 1956-present, and to invest in low-risk funds that netted him a comfortable, but never lavish, retirement.
I see the crazy look in the eyes of my peers at work, as we all swallow -30% losses in our 401k plans. But I do not hear them discussing changing their investment strategies, or moving to lower-yield mutual funds. Instead they talk about "waiting it out" and expect things to recover soon, so they can go back to making high-interest returns on high-risk Eurostocks. And they talk about how they can't wait for the housing market to bounce back so they'll at least see their house return to the value for which they paid. They don't acknowledge they overpaid by 40%, instead they wonder how soon they'll see that 40% return so they can sell it to someone for $40k more than they spent and move into an even bigger house. The house they deserve.
If we are not going to learn the hard lessons that are required to prevent a future repeat mistake, then what is the point of fixing things?