Please read this most timely article from the WashingtonPost. It seems the liquidity crisis is likely to NOT respond to current measures. I worry that the Paulson is still enamoured of the idea that the market will "self-correct", and with this injection of new funds confidence will magically return, banks will start shoveling money out the door, and happy days are here again..
Guess what? I went to Wal-Mart the other day. They had one cash register open and you could have played rugby in the aisles. NOBODY is spending, loaning, investing, or doing anything but waiting for the shoe to drop.
How about a minimal dead-cat bounce in the stock market, followed by a steady slide into economic paralysis, and then what new kitty will Paulson and his ilk produce? Unfortunately, it seems that the "always wise market" theory is so deeply embedded that few remember the insight of Keynes's General Theory: Markets and economic demand CAN fail, and economic activity CAN freeze. We've had a good run but need to remember that unemployment during the worst year of the Depression was close to 30%.
I hear Republican after Republican bloviating that the problem was CAUSED by government and all we need to do is to let the market solve the problem. Give me a shovel please, and let's try and remember that the problem was caused by a LACK of governmental regulation and supervision.