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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.

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* 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&

See also:
A Rate of Zero Percent From the Fed? Some Analysts Say It Could Be Coming
EDMUND L. ANDREWS
NYT, October 29, 2008

http://www.nytimes.com/2008/10/30/business/economy/30zero.html