When deflation is your view, cut down every tree and print as much money as possible to prevent it, right out of the Fed playbook. Fed Pres Bullard is saying “The US is closer to a Japanese style outcome today than at any time in recent history. A better policy response to a negative shock is to expand the QE program thru the purchases of Treasury securities.” Rates aren’t low enough? Greenspan was worried about deflation in ’03 and is why he cut rates to 1% and left them there. This as one of the great commodity bull runs ever was getting underway. The consequence of that policy was a huge credit bubble. So Bullard says the risk again is deflation in the bust and cutting rates to zero and buying $1.5T worth of assets may not be enough. This is the bailout plan of the current bailout plan which followed the Greenspan bailout plan. A deflation outlook just as the CRB index is near a 3 month high and rents (25% of CPI) are moving up.
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