Fed Cuts Rate: How Low Will They Go?

Yesterday, the Federal Reserve went against my predictions of two weeks ago and cut rates rather than raised them. This time, they cut the key rate to a five year low of 1 percent. Now, the only questions that remain are, how low will Ben Bernanke go with these cuts, what does it mean for the dollar and will they eventually have to raise the key rate drastically?

Question 1:
There has been talk that Bernanke is willing to go below 1 percent on the rate. There was an article in the London Times two days ago that suggested the Bank of England was going to have to cut their rate to zero in order to hold off an inevitable depression.
My question to that is, what does it really matter once you've cut the interest rate to zero? The currency will be so inflated that it will be worthless by that point.
If the Federal Reserve and other Central Banks do go below 1 percent, that could only mean bad things for the real economy. It also means that at some point, the Federal Reserve is going to have to do one of two things which brings us to question 2.

Question 2:
What does all of this mean for the dollar? When discussing hyperinflation, many refer back to the early 1920's when the Weimar Republic was in its infant stages, and it eventually had to resort to printing massive amounts of currency to "save the economy." What it did was inflate the currency so that people found more use for the money in their fireplaces to heat their homes than they did when they went shopping. Cigarettes actually became a means of exchange in Germany during that time as a wheel barrow of German monies could not come close to buying one U.S. dollar.
What people don't realize about the Weimar depression is that depressions never happen withou monetary contraction of some sort.
In the case of 1920's Germany, the contraction happened in the form of lack of foreign money coming into the country. No one would lend to the "responsible" party of WWI. The chancelor said basically that one way or another, his people were going to get paid. So, he resorted to printing money so that his people could buy food. In the long run, it did not work.
Then, the French, who were not getting their war reporations from Germany at that point decided to occupy parts of Germany as colladeral on the reporations.
That is when the U.S. stepped in with the Young and the Dawes Plans.
The U.S. basically said that they would lend money to Germany, then Germany would pay war reporations to England and France. Then England and France could pay war debts to the United States. This became a vicious cycle.
What the U.S. did essentially was create a situation where they were the rug and Germany, France and England operated on top of the rug.
The only problem was that if anyone pulled the rug out from under them, the whole world would sink into a depression. Some six years later in late October 1929, the Federal Reserve did pull the rug out from under the operation when they raised interest rates and contracted a third of the money supply. This made the U.S. stop giving loans out and it made them begin to call in their old loans at the same time.
In other words, when it comes down to it, the central bank is going to protect its dollar. Eventually, they will have enough of the inflation, and they will contract a large sum of the money in circulation, and that will be the begining of the depression.
Another scenerio is that they allow the interest rates to fall to zero and they allow the dollar to crash. Then they will come on TV and tell the American people that we need to merge Canada, Mexico and the U.S. into a common currency in order to get us out of the hyperinflationary depression.
Where will the contraction be in that depression? We are already seeing the arificial contraction of money as banks continuously hoard money everyday from the American people. They can print it all day long, but if no one will lend it, it's the same as if it doesn't exist.

Question 3:
Right now, the latter I just mentioned about merging currencies is a long shot for the financial elite, but they do seem very bold right now.
They will try it eventually, but I don't know if it will be right now.
My guess is that sometime after the election, and quite possibly shortly after the new president takes his oath, the Federal Reserve will begin to raise interest rates, and they will go as high as they have gone low.
This will immediately cause unrest in the markets and on the streets, and we will see some of the most drastic changes in the American system we have ever seen.