Currently, the US Government operates it's monetary base following Keynesian Economics. Prior to the Great Depression of the 30's, this was not the primary economic practice. Therefore Keynsian ecomomic model is NOT an absolute mechanic that is guaranteed to be the "Best" model to follow. By far the majority of all governments across the world follow Keynsian currently.
Keynsian economics, Loosely states that in economic contractions, the government must actively counter deflation with an inflation attack. Basically during the good times government "cools" off the economy by increasing taxes/paying off debt, and during economic dowturns government spend/cut taxes to stimulate the economy to minimize the cycle extremes. Unfortunately during 2000-2008, the "expansion" was funded by debt spending and tax cuts. Therefore the USA (and many governments) are not well positioned for this economic downturn.
The three main players driving the US recovery is Ben Bernanke of the Federal Reserve Bank, Tim Geithner of the US Treasury, and President Obama, are ALL Keynsian believers. Therefore what we have here is the US fate on a theory, that to-date, has shown cracks in the foundation. If interested in alternate theories, I suggest reading up on Austrian Economics, a great web site is the Mises Institute.
Ben Bernanke works for a quasi-private institution called the Federal Reserve Bank. This organization is NOT part of the US Government. Ben Bernanke's college thesis was on the US Great Depression in the 30's. Mr. Bernanke put forward that the US Great Depression problems could have been minimized if the Federal Reserve AGGRESSIVELY expanded the US monetary base.
Mr. Bernanke is not the only leader of the US actions in the current financial crisis, but he is the major key player. The actions of Mr. Geithner is often orchestrated with Mr. Bernanke.
Therefore the actions the US Government is doing to improve the economic crisis, by enlarge, is following one man's college thesis, Ben Bernanke. Obama has indicated he agree's with the actions by Mr. Bernanke. I believe Mr. Bernanke is now following his thesis to its ultimate end. Keep in mind, the US Democracy is in the hands of an unelected and non-government official.
I for one do not believe Mr. Bernanke thesis is correct, and will result in unintended consequences. In the years to come, you will hear defenses as there was no other choice but to do what was done. I for one disagree.
In any event, yet another reason why I prefer investments based on hard assets like food, metals, and energy.
Lets hope Mr. Bernanke thesis does better than a D+. See Mish's post for point for point on Bernanke failing at his thesis.