Although frequent supply of extra liquidity by central banks certainly calms markets, some contraction of the amount of money created in recent years may be needed if the inflation of asset prices is to be prevented from impacting food and other costs similarly.

Historically, bubbles which have become hyperinflationary have usually required reversion to the discipline of gold to restore confidence and stability. However, due to burgeoning leasing of gold for short-selling and use of forward sales and derivatives by the mines, much future gold production has been pledged or sold at prices which might not cover extraction costs.

Since the paper gold thereby created along with the debt paper and debt derivative paper is held in the banking and investment system, ultimately balancing the books may have complexity beyond easy comprehension.

When negative outcomes are possible, the prevention of which cannot be widely understood, an environment for fear can be created.

dr venables preller, Warminster, UK

Carlos,

when you go to the ATM, you expect money to come out right? Well would you prefer it if your bank - because it cannot raise short term lines of credit from the Fed/ECB/BoE etc as you would have it - became illiquid and unable to pay out to its customers? Because that's what you're asking for. Anyone who thinks the banks are going to be stupid enough to take this money and use it to finance more CDOs or carry trades - which are driving most of the current confusion - hasn't a clue what's going on. Surprising as it may seem to some, banks need to borrow money from each other on a regular basis and if they can't borrow, they can't function. Lenders won't lend to each other right now because no-one knows how much bad debt everyone else is going to be sitting on when the music stops. At times like these, co-ordinated action by central banks is essential for financial markets to work. No one is "bailing out" hedge funds, they're taking big losses and so are the investors.

Mike, Leeds, Yorkshire, UK

Should the Federal Reserve help bail out billionaire hedge fund managers and millionaire traders, the very people who bought the risky mortgages that led to the current market panic? The people who were responsible for what happened played with other people's money, marketed arcane financial products with false promises of fat profits, but stuffed their own pockets with big bonuses. Neither these masters of the universe nor their greedy but naive investors deserve to be bailed out. They deserve what is coming to them. Lower interest rates would help operators of hedge funds and other money managers because the housing market presumably would strengthen as mortgage rates fell.
Markets have been taking more risk than they should because they believe that central banks will come to their aid during times of crisis, like now. A revived mortgage market would give the hedge fund operators and other holders of the risky securities a chance to sell them, which they are having trouble

Carlos, Irvine, USA CA