<< Even an old-fashioned Keynesian
would be a voice of reason right now, pointing out that you can't push on
a string. Remember the flat LM curve, liquidity traps and all that
gibberish? It seems more appropriate to argue that the Fed should
accommodate public spending, but only the latter can counteract a general
glut of commodities >>
Ed,
I'm not sure were at the flat part of the LM curve, though certainly Japan is! I think there will be increasing pressure for at least a 1/4 pt cut in the FF rate. The inversion of the yield curve at the mid-range (2-5) is going to be harder and harder to fight.
BTW, the volatility in the 30-year T-Bond (as measured by its coeff/variation) is pretty interesting - and suggests how uncertain inflationary expectations have been over the last 18 years. With a 5.35 long- bond, that could easily spike down or UP (remember, 1994 was the worst year for bonds in many, mant years), I think the debt and equity markets are in tremendous turmoil. One other fact, spreads between long term corporate bonds and T-Bonds have been widening - yet, another sign of an impending realization crisis!
Jason