Permanent zero. That’s what Edward Harrison calls the Fed’s new policy of guaranteeing ultra-low interest rates for the next 2 years.

But first, let’s look at what happened yesterday. Gold soared $21…again, setting a record.

The Dow fell 76 points. Not much of a follow up to the bullish day on Monday. Maybe investors are catching on. Maybe they realize that we are in a ‘zero stage” economy.

Zero is a funny number. It is not a number at all. When you say there are ‘zero’ donuts on the table, how many are there? None at all. There are no donuts on the table. So how many is zero?

And what happens when you add zeros together? Nothing. But when you multiply by zero something extraordinary happens…something becomes nothing. No kidding. Zero times 6 = 0. Zero times the entire federal deficit equals zero. Want to make something disappear? Multiply it by zero.

And what happens when you multiply a Great Correction economy by zero rates of interest? Hey, that’s what we’re finding out.

If a person is zero years old…how old are they? They have no age. They do not exist. Zero is empty…non-existent…it is nothing. It is a void. It is where the person who does not exist sits to drink his coffee.

But what is a void? It is like describing the universe. You may say that the universe began with the ‘big bang,’ but what was there before? Zero? No… There had to be something to blow up.

If you say the universe was a ‘giant void,’ it only raises our curiosity. How can a void be giant? And what exactly is in a void?

Let’s try to imagine something that is so small it has no dimensions. None. Take a measurement. Cut it in half. Do that again…and again…and no matter how many times you do it, you still have something. You can’t make the damned thing disappear! You can’t get to nothing, no matter how hard you try.

Therefore, zero – by definition – does not exist! And if it does not exist, there is no point in talking about it.

We only bring it up because zero is becoming a larger and larger part – if you can imagine it – of the US economy. Zero interest rates. Zero growth. Zero stock market appreciation. Zero housing gains. Zero new jobs.

Yes, dear reader…the economy is a Big, Fat Zero…

The whole thing is breathtakingly bizarre. The feds’ latest measure puts consumer inflation at more than zero – about 3%. John Williams’ Shadow Stats puts it at 11%. And yet, the Fed lends member banks money at zero interest.

It is not only giving money away, it has pledged to do so until the middle of 2013.

“Get it here! Free Money! Get your Free Money here! For the next 24 months!”

Readers may think this is a good thing. Now, the banks know that all they have to do is to borrow the Fed’s money for nothing…and then lend it back to the federal government for 10 years at a higher rate. Maybe 2% higher. Two percent is not a lot. But the feds will borrow $3 trillion or so during that 2-year period. Let’s see, 2% of $3 trillion is $60 billion. Not bad. Especially for doing zero work.

In other words, for zero effort and at zero risk the banks will make beaucoup money from the Fed’s permanent zero interest rate policy. It is supposed to encourage them to borrow and lend…and thereby stimulate the economy to grow.

But we’ll make a prediction. No, several of them.

Bankers, being who they are, will still find a way to lose money. They are public utilities now, run largely for the benefit of their employees. Bank managers will suck out the profits, leaving banks severely undercapitalized. Then, when US Treasurys collapse, the banks will collapse too.

Another one: permanent zero is not just a policy measure…it’s a prediction and a curse. It is what you get when you take the road to Japan – permanently zero interest rates…and zero growth too.

And another one: when they multiply a permanent zero interest rate policy with an economy in a Great Correction they will get…zero.

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.