It will be interesting to see what happens next week, and in subsequent weeks. I have no idea what will happen.
I do know what would have happened if they didn't do this - a classic deflationary spiral. As liquidity dried up we'd have seen loans called, closing a fair number of businesses. Consumer loans would have dried up, too, meaning no car or real estate sales, and plummeting real estate values. Credit card credit would have dried up, too, and when your bank was in liquidation, they would expect it to be paid if full. Unemployment what have surged. It would have been pretty much like the depressions of the 30s, or of the last century, only significantly worse because the amount of credit is higher now. I expect gold would have been pummeled, too, probably to $300 or less, and silver probably back to the $3 range.
The legislators, knew this, too. That's why, even though it is massively unpopular, they ran it through. If they did nothing, and unemployment hit 10-20% by the election, which it would have, none of them would have been re-elected.
Whether or not this is good thing in the long run remains to be seen. One thing is sure - the reason we are all here is that we knew this crisis would be coming, and that the government would respond with something like this, so none of us should be shocked. We have said for a long time that when the crisis came the government would have no real choice but to print its way out of the situation.
When problem is severe, drastic solution could be better than bandage aid. I mean that getting in high unemployment and/or depressionary environment could be still better than printing another 700 billions and waiting for the point when this amount gets vaporized. It may happen quickly enough. Nobody (in politics) cares about fundamental problems. When Fannie and Freddy (i.e. government) buy every mortgage in sight and every foreclosure is never buyer's fault, what kind of accountability could be expected from the industry. I see only one implication to retail investment: long-term investing loses sense. As current crisis shows shareholders are the only guys suffering actual losses, and these crises will be more frequent in future.
I don't necessarily disagree. As I posted on another thread, this doesn't solve the problem, it just postpones it. The economy will get a lot worse before it gets better. A deflationary depression is harsh medecine, but may turn out to be better than the cure - I really don't know what the economy will do in response to this.
If it hadn't gone through, I would have known what to do (sell MFN, short the market), but this way, I guess I'll stay where I am.