I was confused when I saw the headline. Was this the same $1 trillion Michelle blogged about this morning? No, it turns out: That was $1.5 trillion for health care plus $2 trillion to fight climate change, both estimated expenses over the next decade. This $1 trillion is to cash out mortgage-backed securities and long-term Treasuries.

It’s important to keep your trillions straight.

As expected, the Fed kept its benchmark interest rate virtually at zero. But in a surprise, it drastically increased the amount of money it will create out of thin air to thaw out the still-frozen credit markets that have cramped lending to consumers and businesses alike.

The Fed said it would purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities, on top of the $500 billion that it is currently in the process of buying. In addition, the Fed said it would buy up to $300 billion worth of longer-term Treasury securities over the next six months. That would tend to push down longer-term interest rates on loans of all types.

All of these measures would come in addition to what has already been an unprecedented expansion of lending by the Fed. Since last September, the central bank has roughly doubled the size of its balance sheet to nearly $2 trillion from $900 billion — even before the action Wednesday — mainly because of its efforts to rescue credit markets…

Starting last September, the new lending programs — including money for bailouts of individual companies like Citigroup, American International Group and Bank of America — have caused the Fed to print new money at the fastest pace in history. But much of that money has remained dormant, because the economic downturn has made banks reluctant to lend and businesses and consumers either reluctant or unable to borrow.

Below you’ll find some completely unrelated viewing. Exit question for amateur (and non-amateur) economists: What’s the bigger risk, deflation or inflation?