NEW YORK (CNNMoney.com) — It appears 0% is here for the foreseeable future.

A year ago, the Federal Reserve took its key overnight lending rate, the fed funds rate, down to near 0% for the first time in its history in an effort to keep the economy from falling into depression.

The cheap money meant lower rates for consumers on credit cards and home equity loans, as well as for many business loans.

The threat of a depression is widely acknowledged to have passed and most economists believe the economy has begun at least a modest recovery. But the Fed hasn’t moved the rates since, and experts don’t think they’re likely to do so for the foreseeable future, perhaps not until 2011.

Fed funds futures on the Chicago Board of Trade, which track the key rate, show investors aren’t betting on a hike anytime next year.

Part of that is because of talk from Fed officials. Fed Chairman Ben Bernanke, named Time’s Person of the Year on Wednesday, has repeated frequently that one of the problems of the Great Depression was that the Fed raised rates too quickly when the economy first showed signs of life, causing a second, much more painful downturn that extended the Depression for years.

Economists say they think the chairman and many other policymakers are willing to wait too long to raise rates rather than risk hiking too soon.

“I think they’ll leave the taps open as long as possible, until they’re absolutely certain the economy is back on track,” said Anthony Michael, head of fixed income for asset manager Aberdeen’s Singapore office.

In recent statements issued after policy-making meetings, the Fed keeps cautioning that it expects economic conditions “likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

That language is widely expected to stay in place when the central bank concludes a two-day meeting Wednesday.

But leaving rates at such levels is not without significant risks.

Low rates can sow the seeds of inflation, which can eat into workers’ earnings and squeeze budgets. It also has been blamed for the fall in the value of the dollar versus other major currencies, such as the euro, which in itself can limit Americans’ buying power.

Beyond that there are concerns that cheap rates can feed asset bubbles. Many blame the Fed’s decision to leave rates at its previous record low of 1% for 12 months from June 2003 to June 2004 as a major factor in feeding the housing bubble. The low rates caused builders to overbuild, lenders to make riskier loans seeking better returns, and consumers to use the cheap credit to buy homes they ultimately would not be able to afford.

While another housing bubble is not likely, some are now worried about bubbles in U.S. stock and bond markets, as well as in some commodities such as gold. The Standard & Poor’s 500 has gained 64% since it hit a low in March.

All those fears have prompted some in the market to argue the Fed risks falling behind the curve if it doesn’t raise rates sooner rather than later. But others dismiss those fears.

“Am I worried about the Fed being behind the curve in raising rates? At this point I want to make sure there’s a curve,” said David Wyss, chief economist for Standard & Poor’s. He said a rebound in hiring could prompt the Fed to move as early as next summer.

But others think the Fed will wait until it sees both a pickup in consumer spending and inflation warning bells.

“The consumer is not a viable spender right now and won’t be throughout most of 2010,” said Jeffrey Burchill, chief financial officer for business property insurer FM Global. “If you’re not seeing spending, it’s going to be difficult to raise rates even if there’s early signs of inflation. Similarly, if you see spending but without signs of inflation, there’s no need to raise rates.”

While economists think there’s a chance the Fed could raise rates late next year, few would be surprised to see them stay on hold all the way through 2010. A survey of 48 top economists by the National Association of Business Economics foresees rates at current levels through the first quarter of 2011.

Part of the reason is the Fed has done so much more than simply cut rates to nearly 0% in an effort to spur the economy.

It has bought more than $1 trillion in mortgages in an effort to keep rates low and spur home sales and building. It also has bought hundreds of billions of Treasurys and debt issued by mortgage finance firms Fannie Mae and Freddie Mac. And it has offered a number of other programs designed to jumpstart lending to small businesses and consumers.

Many believe the Fed will have to sell a significant portion of those assets into the market before it is ready to raise rates

“There are too many things that have to happen before the Fed is in position to (raise rates) again,” said Kevin Giddis, managing director of fixed income at investment house Morgan Keegan.

By Chris Isidore

It’s not the first time an apartment has been anointed the smallest in Manhattan in some category, but this one might really be it. Two people and two cats live in this 175-square-foot studio on 110th Street, which the Post labels the smallest legal apartment in the city. Zaarath and Christopher Prokop, both accountants, bought the pad — roughly the width of a subway car, plus a three-foot-wide bathroom — three months ago for $150,000, or about $857 per square foot. (Monthly maintenance: just over $700.) They make it work by filling their home with…practically nothing at all: a queen-size bed, a flat-screen TV, a leather storage bench, and a shelf/wine rack. They don’t cook, so they use their kitchen cabinets for clothes instead of food. They jog to work in running gear and pick up their officewear at various dry cleaners along the way. When the couple pays off the mortgage in two years, they plan to remodel the space with a Murphy bed and larger windows. Easiest way to make a shoebox feel like a townhouse!

· Cozy-crazy couple makes tight all right in the city’s tiniest studio [NYP]

by Sara Curbed.com

NEW  YORK , September 30, 2008 — The New York Stock Exchange will implement new circuit-breaker collar trigger levels for fourth-quarter 2008 effective Wednesday, October 1, 2008.

Circuit-breaker points represent the thresholds at which trading is halted marketwide for single-day declines in the Dow Jones Industrial Average (DJIA).   Circuit-breaker levels are set quarterly as 10, 20 and 30-percent of the DJIA average closing values of the previous month, rounded to the nearest 50 points.

In fourth-quarter 2008, the 10, 20 and 30-percent decline levels, respectively, in the DJIA will be as follows:

Level 1 Halt
A 1,100-point drop in the DJIA before 2 p.m. will halt trading for one hour; for 30 minutes if between 2 p.m. and 2:30 p.m.; and have no effect if at 2:30 p.m. or later unless there is a level 2 halt.

Level 2 Halt
A 2,200-point drop in the DJIA before 1:00 p.m. will halt trading for two hours; for one hour if between 1:00 p.m. and 2:00 p.m.; and for the remainder of the day if at 2:00 p.m. or later.

Level 3 Halt
A 3,350-point drop will halt trading for the remainder of the day regardless of when the decline occurs.

Background:
Circuit-breakers are calculated quarterly.  The percentage levels were first implemented in April 1998 and are adjusted on the first trading day of each quarter.  In 2008, those dates are Jan. 2, April 1, July 1 and Oct. 1.

Read more about it at http://www.nyse.com/press/1222772891771.html

NEW YORK (Fortune) — The economic storm pelting the U.S. economy is going to do plenty more damage to already flattened job and housing markets.

But as dark as the next three or four quarters could be, the U.S. economy appears to be undergoing a more lasting, and ultimately uplifting, shift.

Americans who for decades have spent an increasing share of their incomes and taken on more and more debt are now, for the first time in years, saving instead.

The personal savings rate, which measures the amount of disposable personal income that isn’t spent, ticked up to almost 3% in the second quarter of 2008, after almost four years below 1%.

While Americans still aren’t going to win any awards for thrift – consumers save more than 10% of their paychecks in creditor nations such as Germany and Japan, for instance – the return to saving carries big implications for U.S. economic health.

More saving is good over the long haul, because domestic savings create a pool of money from which companies can borrow to invest in new plants and equipment, creating the jobs that push living standards higher over time.

A growing domestic savings pool could also reduce America’s need to borrow money overseas – which would make the U.S. less beholden to foreign creditors who now supply us with hundreds of billions of dollars in financing every year.

Unfortunately, thrift will cost in the short run. Saving more means spending less – which translates into more hard times in retail and other consumer-driven businesses like the auto industry. The latest evidence of the shift came in Wednesday’s steeper-than-expected pullback in retail sales. They dropped 1.2% in September, in their first year-on-year decline in six years and only their third drop in the past 16 years. Economists had been looking for a 0.7% drop.

Given that two-thirds of economic activity is consumer spending, today’s thrift will exacerbate a general downturn and will weaken the impact of the massive interventions the government has made in the financial markets.

“The breadth of the decline shows a broad-based pullback in consumer spending that will not quickly turn around,” writes PNC economist Stuart Hoffman, “even with the arsenal of federal firepower now aimed at the Great Financial Crisis of 2008.”

Federal actions such as a $250 billion plan to buy preferred shares in banks, along with a public guarantee of bank deposits and bank debt, are aimed at unlocking credit markets and boosting economic activity. Policymakers have promised to get banks lending again, to restore economic growth that has clearly been ebbing even as government data chalked up modest gains in gross domestic product for the first half of the year.

“This plan is a means to an end,” Hoffman says of the Treasury’s agreement to make capital injections in banks such as Citi (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500). “The key concept is that reasonably prudent lending should be supported.”

But as the economy shows further signs of deceleration – factory production and industrial capacity utilization fell sharply in September, the Federal Reserve said Thursday – the question is who the banks will be lending to. Indeed, merely plying the banks with capital isn’t certain to get them lending in a world in which businesses and consumers are trying to reduce their leverage after a long run of credit expansion.

William Cline, a senior fellow at the Peterson Institute for International Economics, notes that the decline of saving in the United States over the past two decades was accompanied by a sharp increase in the rate of bank lending, as consumers cashed in on the appreciating value of their houses.

Bank credit growth, after averaging around 6.5% in the 1990s, spiked to 12% in the four years ended in 2007, Cline says. Meanwhile the U.S. personal saving rate turned negative at the height of the housing bubble in 2005, down from around 7% in the early 1990s.

“We were already on course to have some return to saving,” says Cline, who is the author of the 2005 book, “The United States as a Debtor Nation.” With the credit crunch making consumer credit scarcer, he adds, and reduced house prices making Americans feel poorer, “We’re going to see some more pressure on household spending.”

For now, that will mean more pressure on companies that sell their goods to consumers. GM (GM, Fortune 500) and Ford (F, Fortune 500) have traded at multi-decade lows this month as U.S. auto sales slowed to a pace last seen in the early 1990s. Macy’s (M, Fortune 500) dropped 12% Wednesday after the department store chain cut its profit forecast, prompting ratings agency Moody’s to warn that further problems could prompt a costly credit downgrade.

The government interventions mean deleveraging can continue without the risk of an economic collapse, which is obviously “extremely positive” in the long run, says Ken Kamen, a financial adviser who is president of Mercadien Asset Management in Trenton, N.J. But that doesn’t mean the short run is going to be particularly enjoyable, as Wednesday’s 9% stock market decline suggests.

Kamen warns his clients that before they make any hasty decisions, they should decide how much stress they can tolerate in their portfolios.

“You don’t want to be resetting your financial future while the compass needle is spinning,” he says. “You may need to sell assets – but only to the point where you can sleep at night.”

In changing times with a very volatile economic market, the impacts of the “bailout” prove that our national financial system has been tarnished but the hope for repair is the result of the country’s ability to stand up and fight through the turmoil. The economic repercussions of the “bailout” while, hopeful, may still not be enough to help our housing market recover from the immense distress we face as a nation. However, with the economy in such a difficult place, it seems that there is no other quick immediate solution to save what is left. The market is oversaturated with listing inventory and this “bailout” will hopefully deplete the mass housing for sale. In a buyer’s market, it is critical to move inventory quickly to stabilize the market conditions so that prices can equalize. The rescue plan will provide solutions for distressed home-owners and possibly even save the mass thousands out there who face foreclosure. Even so, the possibility of resolution from financial destruction is very real for the mass public so the immediate effects of the “bailout” may not impact the majority population who is suffering and losing their homes. It is hard to really predict the consequences of this emergency plan but the fact that our national governmental body has stepped in is a significant indicator that our country is in some pretty significant trouble. Our best bet is to listen closely, assess our personal situations and consult professionals who can direct and advise us to a better place. This economy and this market should correct itself and now with a helping hand should put us on the path to recovery. Who knows, this may be the case or this may just be the beginning. Regardless, our confidence should rest in our own decisions based on our own personal scenarios. While we depend on our country to do the right thing, the only final judge of that is ourselves.

Regard to our shifting market,

Helen Oliveri