Well so much for the New Deal analogies. Yesterday the Fed did exactly what Uncle Miltie would have done - dropped a trillion plus bucks from a helicopter onto the stock market. Combined with the fiscal stuff that Obama's been doing, we've entered into very new, and very weird territory. I largely agree with this guy who points out that we will eventually have some nasty inflation and some real "Third World" debt issues if things break a particular way.
My initial take on this, sitting in a hotel lobby, is that the Fed must have seen something in the data that scared them. I'm not sure why Bernanke was talking about the recession ending maybe later this year UNLESS he was counting on this working.
Folks, doing this fits with what the monetarists (read here, University of Chicago economists) say you should do. It's textbook. Only a small slice of economists have a strong critique to it - the so-called Austrian School. They argue you have to ride out the problems, make the structural adjustments, and that any government intervention simply makes it worse.
Alas now any arguments that Keynesian economics can finally be tested here are gone. This blurs the line between monetary and fiscal. We really won't be able to know which one of these, fucking gigantic, interventions has the biggest impact when, ok, IF, we get out of this mess.
The Fed yesterday basically instantly added a trillion, deep breath 1,000,000,000,000 DOLLARS into the money supply. This had better work or "Welcome to Zimbabwe!"