With glacial speed, Alan Greenspan is coming around to the view that a faltering economy, not incipient inflation, is the most immediate threat. But instead of moving speedily, the Federal Reserve will soon begin a series of baby-step reductions in interest rates. This sluggish, woolly-mammoth-like response is a danger.
Longer term, though, there is another potential hazard. The Fed could fall into the trap in which the Bank of Japan finds itself: Interest rates are cut and cut and cut, yet the economy doesn’t recover. The U.S. experienced such a phenomenon in the 1930s, when Treasury bill rates were almost 0% and unemployment remained in double digits until the Second World War. Pushing on a shoestring, it was called.
~ Steve Forbes, "Going the Way of Japan?," Forbes, January 22, 2001