Both of these answers skirt the problem though. He's capable of anything based on the great lengths in which they go to describing his intellect. I agree fear is a very powerful tool, but why is it that the smartest human on the planet can't come up with a better solution than actually killing millions of people? It's absurd and accepted because it's what Moore gave us. Surely a man that can create life and manipulate a god could come up with a way to control the situation without destroying so many lives. The movie just makes this problem I have even worse because anyway you slice it there is no way blame on Dr. M would solve the problem. You can join forces to fight an alien or squid invasion. No matter how hard you try you can't join forces to fight a god, even when your planets smartest man can't come up with a way to defeat him, not to mention he's an American which blame would eventually fall back on. Hell he could sit on Mars and destroy existence, what is world unity going to do to stop that?
Like what? Have the squid show up but not kill anyone? Not sure if that would have shocked enough or provided enough of a legitimate threat to stop the doomsday clock.
But from a storytelling point of view, the death of millions at the hand of one of its heroes and protectors is quite necessary and very much at the heart of the story. The very difficult question of how much evil and harm are you willing to do or how much of a monster are you willing to become (Ozy, Comedian, Rorschach) in order to do good? The novel keeps upping the anty on that question from the personal destruction of self to the destruction of millions of lives.