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Here Comes Da Zirp!

How likely are we to see a zero percent interest policy? Pretty likely:

"Federal Reserve Chairman Ben S. Bernanke signaled he's ready to cut interest rates to the lowest level on record should the central bank's actions fail to stem the deepening economic slump.

Policy makers said yesterday that ``downside risks to growth remain'' even after their half-point reduction in the main rate to 1 percent. The Fed dropped a reference in its statement to threats from inflation, projecting "levels consistent with price stability'' in coming quarters...

Bernanke is drawing on an academic career studying the failed efforts to prevent the Great Depression, and yesterday's shift indicates he's prepared to revisit his 2003 commitment as a governor to lower rates to zero percent if necessary. Should lending fail to revive by December, the central bank will probably cut by another half point, said former Fed Governor Lyle Gramley...

Reflecting a crisis that has reverberated throughout the global economy, the Fed's Open Market Committee yesterday said that international rate cuts should contribute by loosening credit markets. The FOMC also said slowing economies abroad will threaten the record boom in American exports, which have kept the U.S. from a deeper slump...

In a new step to increase the availability of dollars in emerging markets, the Fed yesterday agreed to provide $120 billion to four counterparts. Brazil, Mexico, South Korea and Singapore get $30 billion each by signing the so-called currency swap lines. The U.S. already has unlimited agreements with the European Central Bank and Bank of England."

Inflation from 2002-07, Deflation from 2008-09, hyper inflation from 2010-???

I could see Gold going to $3,000, by way of $300 first.

>

* With apologies to Flip Wilson

Source:
Fed Signals Door 'Open' for Cutting Rates to Lowest on Record
Scott Lanman and Craig Torres
Bloomberg, Oct. 30 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=adtjOhAF5mEk&

The Big Picture is moving! The new post here

Thursday, October 30, 2008 | 07:05 AM | Permalink | Comments (41) | TrackBack (0)
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Comments

I have not owned gold or gold shares since the late 70's. I agree with your reasoning Barry, and I wish I didn't.

As discussed a little last night the federal debt jumped by 800 billion since September 1. This is in reality an unbelievable number. Enormous. And if Bernanke is serious about how much he's willing to spend, it is just the beginning.

Barry, if you have the time over the weekend, for those of us who are investors and not day traders, could you put up what you can find about which countries are most likely to be fiscally responsible now and over the next 5 years? If it is Germany, or Switzerland, or some other....I think that is where I'd like to concentrate my investments over the next few years.

This massive debt increase will only end badly...we all feel that in our gut..

Posted by: Bruce in Tennessee | Oct 30, 2008 7:18:37 AM