It will drive down the value of the dollar, which is exactly what we need, given the trade imbalances and current account deficit. It will encourage domestic sourcing of products we currently import.

You are assuming there exists domestic suppliers. It takes TIME to rebuild a shattered manufacturing base. And it takes money. Two things we are currently in very short supply of. This might have worked 20 years ago when the dollar was being kept artificially high by Japan and China to drive up their exports and fuel outsourcing but that ship has sailed. The jobs are gone and they're not likely to come back. Now the effect will be to drive up inflation as imported products grow ever more expensive.

As I said before the Fed is essentially out of options. It has kept interest rates artificially low for too long that there was no room to decrease them enough to have any effect on the economy.

This move is pure desperation hoping to jump start something in the real economy before the mid-to-long term inflation presures catch up to them. Unfortunately it will not work.

Is that is doesn't need to be that big to be crippling.

With wages remaining stagnant (in some cases even declining) and ever increasing numbers out of work and reliant on unemployment (a major hit on take home pay), even a modest inflation rate of 2-3% robs people of wealth and purchasing power. With so many American's living paycheck to paycheck even a small hit can pull them under or make them more dependent on credit cards just to by.

The Febs current move will drive down the dollar increasing the prices of imports (which hits every sector from food to electronics to clothes etc etc). Decreasing commodity prices are offsetting some (but not all) of this inflationary pressure.

And those arguing a revival of American manufacturing that's not going to happen in the near or mid term (most likely not long term either). The manufacturing sector is anemic at best. Re-tooling and re-builing capacity will take time (a decade or more) and enormous investment (far far more than anything currently proposed). A strategic devaluation of the dollar to help domestic industry might have worked back in the 80s when we still had a domestic manufacturing base. But it is far to late now.

Yes too many Americans are irresponsible with their money. Over-reliant on debt to fund their lifestyles (much like corporate America these days).

But not all (or even most) of the blame can be laid at the feet of irresponsible behavior. The modern economy is structure in such a way that saving money is punished (interest rates in savings accounts don't even keep up with inflation anymore). Real wages have been stagnant to declining for close to a decade now leaving less and less money available to live on. Inflation in housing prices, medical bills, food, transportation and educaction means that Americans now spend 50-75% of their income on basics that 30 years ago use to take up 20-30% of household costs.

Even if one is fairly responsible with money it can be extremely difficult to get by today. Many Americans are stuck in a situation where a single major (or even mid-sized) event (usually a health crisis) can cripple them financially.

They knew just how bad things were. They knew there was no way to fix this mess. So they pulled their cards in let the Dems take over. Now they can sit on the sidelines, distrust any real efforts at reform and be snarky all they want. They get to yell and scream but they don't actually have to DO anything beyond yelling and screaming.

While we're screaming about $165 million bonuses, we still don't have a good idea how the first $350 billion of TARP money was spent. We don't yet know with the Treasury is going to do with the second $350 billion as Geithner has yet to release his plans. The woes on Main Street continue to get deeper.

As of yet there has been no real legislation proposed or regulation dealing with the root problems of derivatives trading, lax oversight (any boost to the SECs budget or powers?) and the complete failure/complicity of private rating agencies. The only moderately good thing I've seen thus far is the Treasury bypassing the banks to make credit available directly to consumers and even that has dubious value.

The simple truth is our political system is broken and unable to take the kinds of dramatic action needed to deal with the current crisis. They can pass ugly legislation in few days that has no real effect but any kind of systemic reform or even repari seems beyond our current politics.

Welcome to the Great Depression II.

The auto industry is being treated like crap because the government blew the bank bailout badly (and yes that was largely under the previous regime). $350 billion poured down the drain and no one on main street can see or feel the benefit. Hundreds of billions more given to companies that give millions in bonues to their management staff. The political reality of the moment is that somebody has to get in it in the shorts to satisfy the public's need for blood.

To Washington, the auto industry fits the bill. Percieved by the public to be 'bloated' and beholden to overpayed union workers (damn those people who can afford THREE meals a day on their salary). With a reputation (deserved or not) of making poor products and not being able to innovate. And, most importantly, declining influence in Washington. They make a perfect target to vent frustration over failures elsewhere.

So the auto industry gets to die in place of the financial industry that caused most of our current problems.