You maybe right, but I do think throwing money at this is now the wrong thing to do. It is not going to fix the underlying problem. many, many bad loans to people who can not pay them. What do you do with a consumer driven economy where the consumers can not afford to consume?
Throwing money at deflation will fix deflation. Companies with bad loans on their books will still have bad loans on their books. They will still lose money.
No, the underlying problem is *not* a few hundred thousand bad sub-prime mortgages. The core problem is vastly larger.
Right now, the fight is against the liquidity crisis that has killed the secondary market for debt (even triple A corporate paper).
If lending institutions have no secondary market, then they can’t sell old loans to obtain the money to make new loans.
With a fiat currency, that sort of situation almost immediately (a few months at most) dries up most economic activity.
So to prevent that sort of credit crunch, fiat economies have central banks that are tasked with providing enough liquidity to handle emergencies.
It’s how fiat systems work. It’s by design.
...And it’s much, much larger than just a few mortgages.