Buffet, as well as John Boggle (inventor of the S&P 500 index fund at Vanguard), are both suggesting that now's a great time to put additional money into the market.

My original "pop quiz" introduces a complication: we're clearly in a recession, and there's some evidence of deflationary prices (i.e., a vicious falling demand leading to falling salaries, layoffs, and falling prices). However, many of the possible fixes being contemplated involve spending an awfully large amount of money. Money that we don't have. That means the U.S. can either just print more money (= inflationary, effectively devaluing the dollars in all of our pockets) or borrow more money (at higher and higher rates in order to attract buyers for the less and less attractive bonds, forcing higher taxes to pay the bills, and thus creating recessionary pressures).

Holding currency (or money markets) over the past two months has been the only winning strategy. Everything else, except maybe gold, has been falling through the floor. The part that seemingly nobody expected was that there would be a "flight to quality" when the bubble popped and "quality" would be defined as the U.S. dollar. If the flight had gone elsewhere (the euro?), things would have turned out quite differently.

That said, the stock market is quite attractive these days. Likewise, if you have the stomach for junk bonds (e.g., debt from GM), the interest rates are nothing short of spectacular -- but you'd be a fool to loan money to some of these firms.

The dollar is definitely deflating. Credit has dried up and so the money supply is contracting. The Fed stopped publishing the M3 monetary aggregate in '06, so nobody really knows how big the money supply really is right now. But look at the price of oil: $50/barrel

Gold has dropped too.

Check out Peter Schiff:
Peter Schiff was right

Brilliant video, watching all these other experts dismissing Schiff out of hand when, in fact, he was largely right with his call on the future.

Ben Stein's recommendation of Merrill Lynch (MER) at $76.04 is worth $11.53 today. Tracy's pick, Goldman Sachs (GS) at $175.00, is now worth $67.42.

Another $800bn going into the market to try and help it.

Atlas Shrugged Updated for the Current Financial Crisis.

Looking for something on another forum, I dredged up an old (spring '06) discussion on confidence level of climate models, whether we are at or near peak oil point or not, costs of limiting emission of greenhouse gases, that sort of things, including an article in SciAm on "Solar Grand Plan". It strikes me that, compared to trillions to be spent on bailing out gambling operations going under the name of "investment banks" or car makers that just now awoke to the third millennium, 400-500G$ subsidies over several decades the article claims would suffice to wean USA from both import oil and domestic coal really sound as peanuts. Not to mention research budgets of ITER and similar.

I'm not an economist, and even if I were, I don't think I'd have any way to check the veracity of Paulson's claim, but you have to consider the source. The severity of a problem that, at that point, was affecting basically only banks and investment firms is bound to be viewed with great fear by a man who worked solely in that industry for over thirty years, and in many cases strongly promoted the policies that brought us to this brink.

These are the same situations that caused the Great Depression, and while that was extremely dire, it in no way led to a collapse of the government.

Still... wow. A half-trillion dollar run on the banks in the space of hours.

When/where was that?

In Tom's link.