So start, I read this, which has an interesting section on Benny's analysis of the Bank of Japan's handling of their recession in the early 90's. His specific recommendations for what they should have done differently early in the correction were:
1. Devaluation of the Yen: If the BOJ devalued the Yen enough, import prices would start rising and consumers would be encouraged to start spending today for fear of higher prices down the road. Also demand for cheaper Japanese goods would rise, creating higher profits for Japanese companies. In Bernanke’s words, “a significant Yen depreciation would go a long way toward jump-starting the reflationary process in Japan.”
2. A “Helicopter Drop” of Money: This is where the term “Helicopter Ben” comes from. It refers to his comment that if consumers were given enough free money, “surely at some point the public would attempt to convert its real wealth into goods and services, spending that would increase aggregate demand and prices.”
3. Purchase of Assets: The BOJ could have begun purchasing assets from the private sector, buying corporate bonds, commercial paper and asset-backed securities in order to inject money into corporate balance sheets. This would encourage corporate spending the same way giving money to consumers would encourage consumer spending.
You can already see #1 and #2 in recent activities of the Fed, and #3 has been discussed already. I'd bet we'll see much more of all three of these, until we inflate our way to parity with speculative leveraged asset prices, or something else breaks (eg: the voting population's tolerance for massive, unmitigated inflation, or foreign investment funds dumping all their US dollar assets on the global market and refusing to buy US dept due to massive, unmitigated inflation).
The forest, though, in this case, is who ultimately gets hurt. Obviously Americans with savings take it no-lube style, as the value of their savings is obliterated by devaluing the currency it is based in. Similarly, taxpayers will struggle to remove their assets of the path of implicit robbery by taxation that intentional massive inflation creates. Ultimately, foreign businesses and governments will remove their dependencies on the US dollar as a stable currency basis for trade and investment, as it becomes obvious the US government actively destabilizes it.
This would not bode well for the US, as they have no appreciable savings, are massively in debt, and are utterly dependent on foreign purchases and investment to continue their deficit-based economy. Exports will do good business because of the exchange rates, but businesses will look to base business outside of the US, because keeping up with inflation will decimate businesses with balance sheets denominated in US dollars. The US GDP (which is primarily composed of US consumer spending and service industries which are dependent on spending) will contract dramatically, and although the government will try hard to conceal it, insiders will know, and pull money out as best they can.
What happens after that is anybody's guess, although I'd guess it won't be good if you're living in the US. I'm not sure any country has ever been successful fighting inflation with currency devaluation and increased national debt, but that would seem to be the only course being considered. I'm sure whatever political party is in power will blame the other one as the ship is going down, but that won't really help the situation.
At the end of the day (or economy, as the case may be), the American people will only have themselves to blame. Partially, obviously, for not being intelligent enough to elect responsible officials who would address problems, even if it meant short-term pain for constituents, instead of pandering to whatever the popular opinion at the time was. Partially, also, though, for not having the foresight to put in place policies and institutions to promote election of officials who were smart enough to see the long term effect and patriotic enough to do the right thing for the country, instead of the right things to pay back your lobbyists and contributers, and get re-elected. Unfortunately, it seems these truths are immutable, and all the smart people can do is figure out how best to not get crushed when the building built, maintained, and largely populated by idiots collapses.
Anyway, that's the big picture, as I see it today. I'll get back to tree posts in the future. :)