New York Times graphic of the Euro house of cards

(or what do you call those long chain-reaction toys with marbles, chutes and swinging pendulums?)

The Fed meets next Tuesday and Wednesday. The argument for more action should include the notion of insurance against shocks. Policy should not be designed to merely prevent deflation and return unemployment levels to their natural rate eventually. It should help make the system resilient to shocks like, say, a disorderly unraveling of the Euro system.

The argument that they want to keep their powder dry and leave some quivers in their arrow in case of unexpected events sounds good but really doesn't hold up to scrutiny. If they don't do enough to help the economy it will be a self-fulfilling prophecy. If they do more and it doesn't prove enough, they can call for more fiscal help more forcefully. The Great Depression wasn't brought to an end by monetary policy alone. It took World War II.