What comes next shouldn't be a suprise to anyone.

Can you say FDR style infrastructure projects?

Here is link to a 2003 Federal Reserve Bank of Dallas paper about "Monetary Policy in a Zero-Interest-Rate Economy". (pdf format)

You can't say the fed didn't tell everyone what they were going to do. They published their play book in 2003, and are currently following it.

1)Cut rates to zero. (if fails see #2)
2)Buy “Other domestic securities” (if fails see #3)
3)“The goods & services solution”


a) This article from FT.com makes the argument that the rate cuts didn't work.
"Fed capitulates: the central bank is broken" .

b) Considering the unemployment numbers, I would argue that the alphabet soup of fed facilities and bailouts ( buying up “Other domestic securities”) also didn't work.

c) Next up will be “The goods & services solution”. From the Fed paper:

“The strategy can be implemented, however, by coordination with fiscal policy-makers. The Federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy–in technical terminology, the Fed would ‘monetize’ the resulting debt.”

Looks like the fed is going to resurrect inflation, even if they have to buy the Brooklyn bridge (literally). I would guess that massive infrastructure projects are going to be started. Probably more food stamps. This seems like a perfect ideology match for the new democratic government.

Oh well, we need expanded electric grid and rail service anyway to deal with peakoil.