Brad DeLong has a post about the approach we have taken to the financial/economic crisis. Although it obviously was not politically feasible I don't understand why another possible solution to the $8 trillion in fool's gold would have been to replace it with fool's paper. If we had simply declared that we were going to print (not borrow) $8 trillion and distribute it to the public, say an equal portion to each citizen, over a period of say 3 years, would that not have solved the problem?
At about $6,500/person/year for 4 years, that would have provided a nice boost to the economy. It would not have caused inflation since it would simply have replaced money we thought we had. It also would have been a nice way to redistribute the $8 trillion from speculators to the public more generally.