For The Fed “There are no second acts in American lives.”

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F. Scott Fitzgerald was right. One chance and one chance only. The Fed took its last step by cutting rates to zero and saying it will buy up all of the debt it can find, perhaps a trillion dollars worth. The market reacted with some relief, but the agency does not have another approach to take now. It has shown its plan. Over the next two or three months, the credit markets will sharply improve or not. If nothing gets significantly better, what happens next?

What happens next is that the recession stretches into 2010 or longer and access to cheap capital does not mean anything. The Fed buys debt in the open market but the credit markets remain in a quite panic as unemployment spikes and housing prices fall. Banks take more massive write-offs and lending does not improve. The life of the country goes to hell.

The reason Bernanke’s plan may work is that it is his last plan and he knows it. His legacy and the financial fate of the country are on the line. He can put nearly limitless amounts of cash into the system. That has to work.

Central government monetary policy has failed before, many times in America and many more times around the world, recently and in centuries past.

Bernamke are reached the last stop. He will know if he has done enough before spring arrives.

Douglas A. McIntyre