Saved By Zero

It's bad enough we can furnish an entire home and not have to make a payment until 2010 and get "saved by zero" to get into a new car but it looks like our country will be in the eerily similar situation as Japan was in the early 90's and maybe by the end of the next quarter. I have been saying this very thing on the blog since February. It didn't end well for Japan. Look it up.

As reported in the Wall St. Journal:

The current leader is Japan, whose overnight rate sits at 0.3%. The U.S. is at 1%, but is expected to reduce rates by a half-percentage point when it meets in mid-December. The Swiss National Bank, meanwhile, has a range of 0.5% to 1.5% as its policy, and analysts say all three, before long, could drop rates to 0% to confront worries about deflation. Right now, the country seen as most likely to get there first is the U.S.

“At the next Federal Reserve meeting, we’ll probably see more measures of quantitative easing and then after that what we’ll end up seeing is the inevitability of zero interest rates,” says Kathy Lien, director of currency research at GFT. “The U.S. has been much more vocally open to zero interest rates than the Japanese.”

The Swiss National Bank is also likely to eventually reach 0%, according to Chris Furness, head of currency strategy at 4Cast Ltd. He also believes that the U.K., which currently holds rates at 3%, could end up there “if things go as badly as they look to be going.”

As credit cards and even auto loans continue to asphyxiate the consumer and unemployment continues to rise, the ending in my view will be ugly still.