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The U.S. economy lost 4,000 jobs in August, and that sent the US Dollar reeling against most major currencies on Friday, as traders began to believe that a US interest rate cut would be a lock at the Fed's next meeting in a week.

What's even more interesting to me is that, when poking around the Bloomberg terminal, I looked at the effective Federal Funds rate, which is the base rate which the Fed sets for banks to make overnight loans to each other, and which serves as a benchmark rate for the US economy. This is the rate which Bernanke and crew will make a decision about on September 18. This is the rate that everyone talks about when they talk about the Fed "cutting" or "raising" rates. Anyway, the effective rate, the rate which the Fed is already setting for these overnight loans, already reflects a 25 basis point cut in the rate. Meaning, practically speaking, the Fed has already cut rates. Here's a screen shot that shows, in column "EFF", the actual effective US Fed Funds rate. And this only includes up to September 6. You can click on the image to get a larger version:

If all of this makes no sense to you, keep this in mind: all this talk about what the Fed is going to do, is probably not as constructive as looking at what the Fed has already done.

What's more, speaking economically here, the Fed Funds Futures contracts, traded through the Chicago Board of Trade, are showing a 128% chance of a rate cut at the Fed's next meeting. How it's possible to have a 128% chance of something happening is beyond me, although I can think of a few things which would qualify:

1. Falling asleep during a Presidential debate;
2. Me forgetting to take out the trash before I left for California (this is true);
3. Me hoping that In-N-Out Burger is open when I arrive in California tonight.

All of these things have a 128% chance of happening.