So the FOMC is going to meet and cut the federal funds rate yet again. Fed Meeting: Rate Cut Likely, Then What? [BusinessWeek]. Of course, given the lack of bank capital, that key interest rate measure has effectively been zero for awhile now, with no discernible effect on US or world economic output. Which suggests that the “Panic of ’08” is not jut a routine economic downturn, but instead a transformative event that may well shake up the conventional wisdom of post-war macroeconomics.
Lord knows we need that, as fluctuating from irrational exuberance to irrational gloom is not doing the markets or consumers any good. Government had better catch up, with some new thinking, or it may become irrelevant as well. Sorry, Milton, monetary policy is really looking dead, at long last.