{"id":16485,"date":"2016-01-14T15:33:34","date_gmt":"2016-01-14T20:33:34","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16485"},"modified":"2016-01-14T15:33:34","modified_gmt":"2016-01-14T20:33:34","slug":"trapped-inside-the-zero-bound-crossing-the-economic-event-horizon","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16485","title":{"rendered":"Trapped Inside The Zero-Bound: Crossing The Economic “Event Horizon”"},"content":{"rendered":"

Trapped Inside The Zero-Bound: Crossing The Economic “Event Horizon”<\/a><\/h3>\n
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A friend of mine, a very successful tech CEO who is also profoundly astute in matters of finance, once asked his economics prof during a lecture on interest rates in his university days\u00a0\u201ccould interest rates ever go negative?\u201d.<\/strong><\/em><\/div>\n
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The professor, gazing over his glasses and down his nose at what obviously had to be an imbecile in his lecture hall calmly set aside a second of his podium time to shoot the idea down:\u00a0\u201cNo.\u201d, he said quite simply, as if he couldn\u2019t believe he had to be explaining this to university level students, \u201cit has to be a positive number\u2026.\u201d.<\/strong><\/em><\/p>\n

My colleague believed him. After all, being in technology he was familiar with the computer code analogy of a negative interest rate, that being the dreaded\u00a0divide by zero error.<\/em>\u00a0Coders take great pains to avoid these because if it actually happens, the currently running program basically \u201cshits the bed\u201d and all bets are off.<\/p>\n

If the currently running program was generating a balance sheet, it may set the line printer on fire instead. If it\u2019s deploying an airplane\u2019s landing gear it may jettison everything in the cargo bay. It\u2019s impossible to guess what will happen. So when people who viscerally understand the kind of consequences the\u00a0ERR:<\/strong>DIV0<\/strong>\u00a0can cause extrapolate it out to an entire economy,\u00a0they\u2019re<\/em>\u00a0the ones that end up \u201cshitting the bed\u201d. It\u2019s really bad.<\/p>\n

I always knew that ZIRP was bad, but I just thought it would be normal, run-of-the-mill bad. You know, where most normal people get screwed for a long time, and then \u201csuddenly\u201d everything comes unglued and the financial system implodes, followed by a government intervention while the usual suspects (free markets and capitalism) get hung from telephone poles.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Trapped Inside The Zero-Bound: Crossing The Economic “Event Horizon” A friend of mine, a very successful tech CEO who is also profoundly astute in matters of finance, once asked his economics prof during a lecture on interest rates in his university days\u00a0\u201ccould interest rates ever go negative?\u201d. The professor, gazing over his glasses and down […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[4174,11719,11720,7475,200,291,378,11721,452,11722,505,2532,558,2558,1389,4696,647,6041,669,11723,3892,1940,1939],"class_list":["post-16485","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bitcoin","tag-capital-formation","tag-capstone","tag-credit-line","tag-default","tag-fail","tag-google","tag-green-shoots","tag-japan","tag-mark-jeftovic","tag-market-share","tag-money-velocity","tag-negative-interest-rates","tag-new-economy","tag-nirp","tag-portugal","tag-precious-metals","tag-private-equity","tag-reality","tag-rebooting-capitalism-blog","tag-wells-fargo","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16485","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16485"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16485\/revisions"}],"predecessor-version":[{"id":16486,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16485\/revisions\/16486"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16485"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16485"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16485"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}