Going for the Permanent Semi-Slump

Some vital statistics of the US economy as of Aug. 13, 2010:

• Inflation (12-mo. CPI): 1.2%
• Unemployment rate: 9.5%
• 10-year Treasury yield: 2.74%

So, therefore,
Really?!?

KC Fed President Thomas Hoenig (via NY Times):

“In judging how we approach this recovery, it seems to me that we need to be careful not to repeat those policy patterns that followed the recessions of 1990-91 and 2001,” he said. “If we again leave rates too low, too long, out of our uneasiness over the strength of the recovery and our intense desire to avoid recession at all costs, we are risking a repeat of past errors and the consequences they bring.”

John Maynard Keynes:

Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom.