Governments are hosing down the markets with bailout money. Central banks, meanwhile, are making sure the cost of borrowing is as close to zero as possible. We smell another bubble in the making…and another inevitable crash. Talk about priming the pump for the next bout of excessive exuberance.

– “The once unthinkable prospect of zero interest rates moved closer to reality yesterday,” says The Times. “Interest rates going to zero in our heroic struggle to become Japan,” says Henry Blodget on Clusterstock.

– Even Japan is racing to become the next Japan. Today, Japan announced it’s joining the global bailout bonanza. Prime minister Taro Aso says he will pump $275 billion of public funds into world’s second-largest economy. This will go toward expanded credits for small businesses and a cash payback to every household.

– Uncle Sam is also considering spreading more government-funded love around, too. This from the NYT:

Senior Bush administration officials are discussing a plan that could help up to three million homeowners struggling to pay their mortgages to stay in their homes, three people briefed on the proposal said Wednesday.

The initiative could be the most sweeping government effort directed at mortgage borrowers since the financial crisis began last year. Under the plan, the government would agree to shoulder half of the losses on home loans if mortgage companies agreed to lower borrowers’ monthly payments for at least five years, according to the people briefed on the plan who asked not to be named because details were still being negotiated.

– U.S. stock futures pointed to strong gains this morning ahead of data that will likely show that GDP is contracting — further evidence, if any were needed, that Mr. Market doesn’t give a hoot about the ‘real’ economy. Yesterday the Fed handed the market another rate cut. And there’s nothing the market loves more than a rate cut…all that easy money to play with.

– “Talk about priming the pump for the next bout of excessive exuberance,” says a commenter on Paul Kedrosky’s Infectious Greed blog. “If the next big problem isn’t hyperinflation, it will mean that we have crashed and burned. I believe there is a movie called No Way Out that basically says it all! Nothing good can come out of where we are at the present moment economically.”

– We’re already seeing a massive rally in commodities, just one day after the Fed cuts. “Gold, crude oil and corn extended the biggest surge in commodity prices in five decades on speculation interest rate cuts in the U.S. and China may revive demand for raw materials consumption,” reports Bloomberg.

The Reuters/Jefferies CRB Index of 19 raw materials jumped 5.9 percent yesterday, the most since at least 1956, when the data begin. The index is still down 24 percent this year. China, the world’s largest industrial-metals user, trimmed interest rates for a third time in two months, and the Federal Reserve slashed bank borrowing costs in the U.S., the biggest oil user, to 1 percent.