Injecting liquidity into the 'market' (banks) is one thing, government funded projects is another, but unless the relief hits the streets, it is all for nothing.
Guaranteeing A causes a run on B leading to the collapse of C. If A pays good interest, then B won't get funds when it's returns are minus, and can't invest in C and around we go...broke.
The one thing which will get the markets moving and unfreeze credit is regrettably to lower interest rates - dramatically and quickly.
It will keep families in homes and people in jobs.
It'll be too late when they're all out of their homes. There is no escaping the conclusion that we have broken the financial system, clinging to a forlorn hope while flirting with the ethereal.
In this global economy the government economic control centre has a dashboard with two main knobs and a few meaningles flashing switches for treasurers to ponder. One is Rates-up-and-down and the other is Taxes-up-and-down. The instruction plate says -
1. When inflation goes up, increase the interest rates by turning the RATE knob to the right.
2. When the government has no money - increase the tax by turning TAX knob to right.
Important - turning both knobs too far in the same direction for too long can cause lack of equilibrium leading to chaos.
They left out the final instruction:
Warning: In times of Chaos turn both knobs as far to the left as possible until equilibrium is reached.
Its time to crank those rates knobs back fast. Especially the one the Australian Treasurer Wayne Swan is looking at.
At least 2% before Christmas and at least 1% immediately into the New Year.
You can always put them back up later (tell them at least a year). If you act fast. Next week - not next month. The alternative is chaos followed by the government being the bank.
Give that dial a twirl, it will work. Empower the man in the street to get us out of this mess or we're all losers.