Our Federal Reserve System at Work.

http://www.nytimes.com/2008/12/17/business/economy/17fed.html?_r=1&hp=&pagewanted=print
Our Federal Reserve Board (Chaired by Ben Bernanke) has entered a new era. The "Fed" as of today cut the benchmark rate to anywhere between 0 and .25%. This rate is a record low for the United States and it is the same as when Japan was trying to decrease deflation. The Fed will start to purchase securities from Fannie Mae and Freddie Mac later this month.
"The central bank acknowledged that recession is more severe than officials had thought at their last meeting in October. “The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” it said."
As was reported today, our Consumer Price Index has fallen 1.7%, which is the steepest drop since the government began tracking the consumer price index. The issues with this low index is evident in many of the large brand stores, many such as DKNY, Banana Republic and Saks are dropping their prices dramatically and offering many different discounts to try and encourage consumers to shop at their store and purchase their clothing.
"“At some point, and without knowing the timing, the Fed is going to have to destroy all that money it is creating,” said Alan Blinder, a professor of economics at Princeton and a former vice chairman of the Federal Reserve, said the central bank. “Right now, the crisis is created by the huge demand by banks for hoarding cash. The Fed is providing cash, and the banks want to hoard it. When things start returning to normal, the banks will want to start lending it out. If that much money is left in the monetary base, it would be extremely inflationary.”"

This article, while it is really scary to think of our economy in such a state, was really interesting because I felt it really demonstrates how our monetary policy works. The Federal Reserve Board is stepping in as necessary and they are using all of their powers to try and stimulate our economy the best that they can.