Prof. Brad DeLong looks at the yield curve and finds the one month Treasury rate nearing the zero bound. Meanwhile, "the TED spread--the risk and liquidity premium big banks are demanding over Treasuries for the loans they make to each other" is jumping up to panic rates. Professor DeLong concludes: "Be afraid. Be somewhat afraid."
Deflation and descent into a prolonged recession, or inflation and ascent into a prolonged period of stagflation. Welcome to Bush World.