I think you mean the 'potential' positive effects of a rate drop, because if you remember, Japan dropped their prime rate to 0% for years and it did nothing. It only makes it easier to borrow and therefore easier to finance growth and restructuring if you want it. But if the climate is negative and no one is buying, then there's no reason to grow, etc.

Deflation is also bad. Bernanke thinks that the effects of the Great Depression could have been mitigated if monetary inflation would have offset the deflation that was occurring. And I think that what he's doing here. Unfortunately, he's about to find out why that doesn't work.