Here's Johnny! 

Inflation will keep popping up in more and more pronounced ways over the next 2 quarters, and the tandem team of the Fed and the Treasury will react with temporary, stop gap measures to stave off a further unwinding of the credit markets.  The forward holds of the Titanic are flooding, the bow is tilting downward, and the response thus far has been akin to flooding the "STEARN" holds to level out the ship...(misspelling and pun intended). 

The ship is going down.  The Treasury will be forced to create more and more money, further devaluing the dollar.  New "structures" like the emergency short term window created to infuse more liquidity into the credit market will be implemented.  Eventually, the Treasury will have to "buy back" US securities with more mysteriously created paper money and on, and on.  Each action will have a temporary "feel good" affect but once the Oxycontin wears off, inflation will rear its head again and eventually, the only maneuver left will be the "Volcker" alternative.  Yes, radical short term rate increases will be necessary which will rain on Wall Streets parade and yes, our parade!

Ahhh, the 80's.  What a wonderful economic season.  For those that don't remember it, do some research.  The wonderful thing about our economy is that for every downturn, there is an upturn (at least we hope).  Our economy is cyclical, we are a manic depressive system that rides ecstatic waves of "irrational exuberance" and suffers miserable periods of hibernation.  It is what it is.  The Fed and the Treasury try to provide the Lithium that keeps the wild swings in check, but every so often, the mania gets out of control and we think that we don't need the medication any more and we live a lifestyle of excess and have to suffer the consequences.

The Government is desperately trying to come up with a new combination of meds to help prevent the ensuing "depression" but try as they might, there are just too many injuries incurred by our period of economic excess. 

All that being said, I am optimistic.  Our economy will turn around.  But I am realistic in that I expect the turn around in about 4 years.  So what do we do in the mean time?  I don't have a clue.