I'm putting myself on the record (not that I haven't a dozen other times on this site):

there is no inflation, if there it is two, maybe three years out at the earliest.  This is massive deflation before your eyes, not even including the outstanding credit card balances and other personal loans  which will never get paid, especially when the jobs start evaporating.  No money=no buying, no buying= companies cut back, companies cut back=job cuts...

Add to that the pressure for the government to come up with (emergency) healthcare and other public assistance and the situation becomes untenable.

Oh, and Al Qaeda.  That's right, I said it. 

There are two solutions, and in order for them to work you have to do them today.

1.  Cut rates.   Dollar is stronger, oil is down, we can take it.  Worry about inflation later.  Worry about the never-going-to-happen wage inflation later.  This is better than bailouts, which will lead to inflation.

2. Cancel mark to market: there is no market.  You have ancient Chinese vase woth millions, but  because the economy's bad no one wants it right this second, so on ebay it's still only at $2.  Is it really worth $2?  Should the bank get to repossess it when you go under for $2?  That's where we are now. You're calling them 20% when they could be 60%. (The government may actually make money on FNM and FRE if/when this passes.)   The result is you might actually be worth something, but still evaporate.