The much-maligned federal government's "cash-for-clunkers" program, is, nevertheless, stimulating the U.S. economy.

True, it may take new cars sales that would normally occur in 2010 and bring them forward to 2009, but that fact, combined with the extra customer traffic the program has created in the nation's auto showrooms, has bumped up auto sales -- providing a slight tailwind for the U.S. economy.

New York Times columnist and Nobel Prize-winning economist Paul Krugman knows the situation facing the United States is very serious, so he doesn't mince words.

Krugman outlined: The housing sector has collapsed. Consumers have sharply decreased their spending, due to a declining stock market, home prices, and stagnant wages. Businesses are cutting investment. Exports, the formerly one strength of the economy, are plunging, as the recession grips emerging markets. The Fed has already cut short-term interest rates to zero. And there are signs of deflation. In sum, the U.S. economy is very close to the dreaded negative spiral that tends to feed on itself, and that could continue for a long, long time without fiscal stimulus.

Hence, the nation needs to pass the fiscal stimulus package, and if anything, the current package is too small, he argued.

It is a Newtonian law of physics. A body in motion tends to stay in motion. A body at rest tends to stay at rest.

Further, as followers of business activity know, it's also a law of economics, and that's yet another argument for a large fiscal stimulus package.

Moreover, it's also a rejoinder to the fiscal stimulus plan's critics. Market absolutists and economic conservatives will frequently state that the stimulus plan isn't needed; all the nation needs to do is "let the business cycle play out, and the recovery will automatically follow the recession" or "let the market take care of things and a recovery will appear, naturally."

Not so, according to John Maynard Keynes. Keynes demonstrated that business cycles sometimes don't cycle. In fact, Keynes demonstrated that, absent key stimulus, commercial activity can be down -- and remain down -- for years. A classic example would be President Herbert Hoover's response to the 1929 stock market and the gargantuan economic slump that followed: the Great Depression. Hoover did very little, from a fiscal policy standpoint, to stimulate the economy in 1929, 1930, 1931, and 1932, and the U.S. economy collapsed in 1929, and remained in contraction in 1930, 1931, and 1932. By 1932, the Great Depression had spread across the globe.

These days, investors have to search far and wide to find positive data points, let alone a positive outlook, for the U.S. and global economies.

And, without question, the financial crisis and slowing global growth, combined with previously weak economic fundamentals in the U.S., are indeed formidable obstacles to any investor's hope for optimism.

Still, perhaps the real the danger lies in not where we are but in denying where we can be, and that's where John Maynard Keynes comes in.

For those unfamiliar, Keynes, along with Milton Friedman and Karl Marx, are the three major philosophers of modern economics.

In the United States, policy markers since 1981 have favored market absolutism, Friedman's view, peppered by government intervention, Keynes' view, when needed.

More recently, during the current decade, market absolutists appeared to have had free rein. Some of these market absolutists are now arguing that 'the market should run its course' and 'recessions, even deep recessions, are an essential part of the business cycle,' etc. Don't believe any of it for a moment, Keynes would say.

Expansion is the normal condition

It was part of the genius of Keynes that he revealed to us that the natural state of the economy is expansion and that a downturn is "extraordinary imbecility." Further, Keynes also reminds us that recessions, or economic downturns, are not necessarily self-correcting.

Keynes also believed that the market economy, in the form of mixed capitalism, could survive only if it earned the support of the public by raising living standards.

Google closed down yesterday finishing at $367.23 per share on a day when the rest of the market moved notably upward. Although I have been very vocal about the stock price being overvalued in my Blogging Stocks posts, (see: 10 Reasons I think Google is going down), Google remains a very good company with a growing brand providing valuable services. So this begs the question: What is GOOG stock worth?

I'm not in the prediction business, I am in the investment business. Is there a price I would pay? Certainly. That price is unquestionably less than most other investors would pay because I always look for deep value. But is there a "fair market value?"

That's a very difficult question because the price is determined by what the last trader feels the stock is worth -- not everyone, not a consensus. For example, if you own a stock that you bought at $20 and it's now trading at $40, and you are holding on long term, then you are not a factor during the day when traders are moving the price up or down a few bucks. Your opinion on the value that day is silent and has no bearing on the price.

In trying to assess what the potential appreciation of the stock might be next year I had to make an assumption about the P/E ratio. This is based on what I envision is the level most traders will be willing to pay. If you use a P/E ratio of 40 and look twelve months out and assume Google's earnings continue to grow on a slower but still strong trajectory, you are looking at a lot of potential upside from here. GOOG's trailing twelve month EPS is $6.82. If it hits EPS of $12 then you might arrive at a value of $480. These are figures commonly discussed in the business pages and by analysts. Some of the thoughtful comments I have received to my posts suggest the same thing. Of course we have read higher estimates by Piper Jaffrey analysts who reached a $600 valuation. But to get there you must allow for EPS of $15 or a P/E of 50. That I am not willing to do, are you?