Keynes on Stable Interest Rates

A good buddy of mine was recently critiquing my admonition that the Fed/Treasury or whatever should post its long-term interest rates. My position is that the volatility that the Fed creates to put the pedal and brakes on the economy (to fight inflation and deflation) actually create some of the volatility in the market (as in how the Real Estate boom was created due to the low interest rates the Fed used to battle the after-effects of the dot-com bubble.

I read an Austrian Economics blog that put up a post on this very subject. The funny thing about it is that it doesn't quote some quack of an economist to bolster its point. They quote Keynes himself, who many people attribute the policy of large government spending:

“A low enough long-term rate of interest cannot be achieved if we allow it to be believed that better terms will be obtainable from time to time by those who keep their resources liquid. The long-term rate of interest must be kept continuously as near as possible to what we believe to be the long-term optimum. It is not suitable to be used as a short-period weapon.” (“How to Avoid a Slump,” The Times, Jan. 13, 1937, p.13).

whaddaya think?