Back to Zero, In Order to Shake Some Action

By December 18, 2008Economy

A round-up of 0-based news about the Fed.

Federal Reserve Board of Governors, news release, December 16:

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined.  Financial markets remain quite strained and credit conditions tight.  Overall, the outlook for economic activity has weakened further.

Meanwhile, inflationary pressures have diminished appreciably.  In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.  In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

Washington Post, “Dollar’s Slump Erases Months Of Solid Gains

The dollar yesterday staged one of its biggest one-day drops against the euro and fell to a 13-year low against the Japanese yen as near-zero interest rates and the Federal Reserve‘s plan to print vast sums of cash dilute the value of the greenback.

The drops dramatically accelerated the dollar’s reversal of fortune over the past three weeks after months of solid gains. The slide underscores the risks the Federal Reserve is taking to jump-start the U.S. economy through aggressive monetary policy.

On Monday, the Fed cut its target for the federal funds rate, at which banks lend to each other, from 1 percent to a target range of 0 percent to 0.25 percent, and effectively vowed to print as much money as it needs to try to pull the United States from a worsening recession.

And the story that prompted this round-up, front page of today’s Washington Post “Style” section, “Here Goes Nothing“:

How do you know things have gotten really, really bad? You know because we have gotten to zero.

Zero is the low beneath which there is no more low. It is nada. Naught. The absence of a thing. Zero: A losing score (blanked! shut out!). A depleted bank account. Less than the bare minimum. Zero: the big fat loser.

Finally, this round of news-numerology allows us the self-indulgence of remembering Tommy Keene, the Washington, D.C., guitar hero who never quite made it to the big-time but still deserves honor for his pop classic, “Back to Zero Now.” There’s no YouTube, so you’ll have to watch him play the Flaming Groovies’ “Shake Some Action” instead.

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