I Think I'm Turning Japanese, I Really Think So

The Fed dropped the federal funds rate to a range between 0 and 0.25 percent. So that's money for nothing, but chicks for free is still being confirmed. (I have no idea why economic crisis makes me cite old MTV references. It's sad, really.) A strategy of 0 percentage rates was attempted in Japan when that economy was in trouble, but it's not clear that the strategy helped much. This doesn't sound promising, but as I say time and again, I'm not an economics guy. So one more time, I fall back on Dr. Krugman:

This is the thing I’ve been afraid of ever since I realized that Japan really was in the dreaded, possibly mythical liquidity trap. You can read my 1998 Brookings Paper on the issue here.

Incidentally, there were a bunch of us at Princeton worrying about the Japan problem in the early years of this decade. I was one; Lars Svensson, currently at Sweden’s Riksbank, was another; a third was a guy named Ben Bernanke. I wonder whatever happened to him?

Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.

Yikes! Well, if this is the direction we're going, we might as well get something fun out of it.