[boris]

As I have pointed out before, Greenspan had one knob to turn: interest rates. Since you cannot set the interest rate to zero or negative, each turn of the knob brings you closer to 'zero control authority'; i.e., that trick won't work anymore.

Since turning the interest rate knob down kept Clinton in office--among other things--there is precious little control authority any longer.

Ergo, the economy will do as it will and Greenspan is powerless to do anything about it. Indeed, about the only thing he can do is turn the interest rate knob the other way, increasing rates and stimulating inflation. So to suddenly discover that 'deflation' is a danger is risible: all he can do is inflate, and make himself to be a knight in shining armour against the 'deflation' dragon that he himself created.

--Boris

[Ranger]

Rather than messing with the Fed Funds Rate, what would happen if the Fed purchased long-bonds (government and otherwise) on the open market, driving down long-term rates while leaving short-term rates intact and pushing cash into the economy in this manner?