We live in very weird times. Here’s an example. So, commodity and energy prices are falling like crazy, as The Wall Street Journal reports:

Raw materials registered another record drop in prices, while energy prices posted the biggest decline in over 22 years.

The report suggests the weakening economy and falling energy prices should continue to drag down inflation in coming months, which should allow the Federal Reserve to keep its focus on spurring growth and containing the financial crisis.

   So, that feels like good news–especially if you are driving a car these days as gas prices come down to their lowest point if four years. Putting aside the very important question that sinking gas prices makes people forget how stupid it is to drive an SUV, lower gas prices leaves more money in the pockets of a whole lot of people.

   So, that makes the Federal Reserve more likely to want to lower rates and spur investment, not worry about inflation:

Late last month, the Fed slashed the fed funds rate by another 0.50 percentage point to 1%, its lowest level in four years. The statement said declines in energy and other commodities, combined with a deteriorating economic outlook suggests inflation will "moderate in coming quarters to levels consistent with price stability."

   Sure. But what is astonishing is how low the fed funds rate is right now (the fed funds rate is the rate that is set by the Fed for banks who borrow money, usually overnight, from each other via the Fed). At ONE PERCENT, there really isn’t much more room for the Fed to cut the the rates.

   Which leads to the obvious question: if things get much worse–as I believe they will–will the Fed be plum tuckered out and unable to help much more? I think the answer is yes.