How is that supposed to work? I can understand if this were a normal cyclical pullback, but this isn't a normal times; there is actual economic destruction wrought by a real (non-monetary) shock to supply. In order to believe this helps, you have to imagine it happening by this mechanism:

"Can you lend to our business that's not allowed to operate and probably won't pay you back?"

'lol no. ... wait, I just got off the phone with our credit line. We can borrow at 3% instead of 3.25%. What's your business model again?'

Usually, destroying some of the supply, but holding the flow of money fixed, means that the remaining items will be bid up. If instead prices are falling, it means that the secondary financial effects of the real shock are exceeding the impact of the real shock itself. If the flow of money is slowing down, one should create more money to avoid worsening the real shock through financial reverberations.

If there are actual, viable ventures right now, given the new conditions, then their lenders' investment probably doesn't hinge on whether the Fed is slightly more lose with credit than the ultra-loose policy it's had for the past year.

Fiscal policy is the obvious solution to aggregate demand problems, not monetary policy.

Fiscal policy creates debt that needs to be repaid. Ordinary monetary policy involves swapping new currency for very stable assets like Treasury bonds that can be sold back later to destroy the currency. As much aggregate demand as possible should therefore be created by ordinary monetary policy, since it's cheaper (and faster and easier).

That's not how it works(1).

As the QE programs have showed, you don't get any demand by creating more reserves in a depression. For those reserves to get traction over the economy you need somebody that borrow from the banks.

(1) - http://bilbo.economicoutlook.net/blog/?p=661

http://bilbo.economicoutlook.net/blog/?p=29140

But monetary policy is quite unfair in that it benefits the wealthy / institutionals most (e.g. through buying of junk bonds) while inflating the money of all other people