USA Zero interest rate hell: re visited

[icm63]

Ex-Fed Gov Meyer Sees Fed Cutting Rates to Zero

Former Federal Reserve Governor Laurence Meyer and former Fed economist Brian Sack on Monday became the latest central bank watchers to forecast a zero federal funds rate early next year.
In a research note Meyer and Sack, now with Macroeconomic Advisers, said once the federal funds rate reaches zero in January the Fed will “immediately implement non-conventional polices” including “targeted purchases of private assets in markets in which the flow of credit is shut off or severely impaired.”
The target fed funds rate for interbank lending currently sits at 1%, matching the 2003-2004 low. Officials are widely expected to lower the funds rate another 0.50 percentage point when they meet next month.
Meyer and Sack had previously expected officials to stop there with the fed funds rate at 0.5%. But now they expect another half-percentage-point cut in January, joining Fed watchers at J.P. Morgan and HSBC in forecasting a zero Fed funds target.
Meyer and Sack expect the Fed funds rate to stay at zero “at least through the
end of 2009.” They also expect a “significant” fiscal stimulus to be passed.
“These actions will not be able to prevent a difficult economic outcome in coming quarters, but they can play an important role in helping to support a recovery thereafter,” they wrote. – Brian Blackstone

We have falling asset prices, [ak disinflation (some may argue defaltion)], USA 90 day bank bill is at 0.02%, and the $USD holding up only just.

I see the $usd strength as the last 'Alamo' for the USA financial system. When this breaks it trend to the south, why have your money in USA and see it loose its purchasing power while you earn less than 0.00% at the bank.

I guess one would place their funds in an currency economy that has high reserves and savings. ie NOT USA !

So is zero interest rate hell, or USA 'Argentina' moment only weeks away ?

[Starving Steve]

Re: USA Zero interest rate hell: re visited

That Bush stinker, Bernankee, is trying to duplicate the Bank of Japan in its management of a zero interest rate policy, but as is obvious to everyone EXCEPT Bernankee, the U.S. economy is not the Japanese economy. The Americans have no savings, and they have few exports except for bad debt and toxic paper.

The obvious model for the ZPG in the U.S. is Latin America where real interest rates have been non-positive for decades. So, the future for the U.S. may well be a run on the dollar, just like the runs on national currencies that have occured throughout Latin America for decades.

Obviously, Bernankee and the Federal Reserve Board are hoping for permanent cheap oil to keep inflation low. This would allow for an economic recovery in the U.S, and according to Arthur Laffer, we would grow our way out of this mess.... That's the theory. :rolleyes: