{"id":28991,"date":"2017-12-19T07:13:16","date_gmt":"2017-12-19T12:13:16","guid":{"rendered":"http:\/\/olduvai.ca\/?p=28991"},"modified":"2017-12-19T07:13:16","modified_gmt":"2017-12-19T12:13:16","slug":"st-louis-fed-promotes-the-mathematically-impossible","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=28991","title":{"rendered":"St. Louis Fed Promotes the Mathematically Impossible"},"content":{"rendered":"<header>\n<div class=\"expanded\">\n<div>\n<div class=\"story-header\">\n<h3><a href=\"https:\/\/www.themaven.net\/mishtalk\/economics\/st-louis-fed-promotes-the-mathematically-impossible-QPSk0yKsvE2kN6bN2TfIiQ\">St. Louis Fed Promotes the Mathematically Impossible<\/a><\/h3>\n<\/div>\n<div class=\"post-summary\">\n<div class=\"publish-info\">\n<div class=\"authorCard authorCard__SfNCX\">\n<div class=\"picture__28iqY false picture loaded\"><\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"photo\"><\/div>\n<\/div>\n<section class=\"deck\">It&#8217;s bad enough when economic writers are clueless about how markets work. It&#8217;s worse when Fed economists are clueless.<\/section>\n<\/div>\n<\/header>\n<article class=\"story-body\">\n<div class=\"body\">\n<div class=\"markdown\">\n<div>\n<div>\n<p>Check out this Tweet by @StLoiusFed.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"tweet\">\n<article class=\"MediaCard\n           MediaCard--mediaForward\n\n           customisable-border\" dir=\"ltr\" data-scribe=\"component:card\"><\/p>\n<div class=\"MediaCard-media\">\n<hr \/>\n<p><a class=\"MediaCard-borderOverlay\" tabindex=\"-1\" title=\"View image on Twitter\" role=\"presentation\" href=\"https:\/\/twitter.com\/stlouisfed\/status\/941865495132819456\/photo\/1\"><span class=\"u-hiddenVisually\">View image on Twitter<\/span><\/a><\/p>\n<div class=\"MediaCard-widthConstraint js-cspForcedStyle\" data-style=\"max-width: 645px\">\n<div class=\"MediaCard-mediaContainer js-cspForcedStyle\" data-style=\"padding-bottom: 64.0310%\"><a class=\"MediaCard-mediaAsset\n                    NaturalImage\n\" href=\"https:\/\/twitter.com\/stlouisfed\/status\/941865495132819456\/photo\/1\" data-scribe=\"element:photo\"><img loading=\"lazy\" decoding=\"async\" class=\"NaturalImage-image\" title=\"View image on Twitter\" src=\"https:\/\/pbs.twimg.com\/media\/DRItrOhU8AEFkIV.jpg:small\" alt=\"View image on Twitter\" width=\"645\" height=\"413\" data-srcset=\"https%3A%2F%2Fpbs.twimg.com%2Fmedia%2FDRItrOhU8AEFkIV.jpg%3Asmall 645w,https%3A%2F%2Fpbs.twimg.com%2Fmedia%2FDRItrOhU8AEFkIV.jpg%3Alarge 645w,https%3A%2F%2Fpbs.twimg.com%2Fmedia%2FDRItrOhU8AEFkIV.jpg 645w\" \/><\/a><\/div>\n<\/div>\n<\/div>\n<\/article>\n<div class=\"EmbeddedTweet-tweet\">\n<blockquote class=\"Tweet h-entry js-tweetIdInfo subject expanded is-deciderHtmlWhitespace\" cite=\"https:\/\/twitter.com\/stlouisfed\/status\/941865495132819456\" data-tweet-id=\"941865495132819456\" data-scribe=\"section:subject\">\n<div class=\"Tweet-header u-cf\">\n<div class=\"Tweet-brand u-floatRight\">\n<div class=\"Icon Icon--twitter \" title=\"View on Twitter\" role=\"presentation\" aria-label=\"View on Twitter\"><a class=\"TweetAuthor-link Identity u-linkBlend\" href=\"https:\/\/twitter.com\/stlouisfed\" data-scribe=\"element:user_link\" aria-label=\"St. Louis Fed (screen name: stlouisfed)\"><span class=\"TweetAuthor-avatar Identity-avatar\"><img decoding=\"async\" class=\"Avatar Avatar--edge\" src=\"https:\/\/pbs.twimg.com\/profile_images\/854678013983707136\/Vb6yqkfW_normal.jpg\" alt=\"\" data-scribe=\"element:avatar\" data-src-2x=\"https:\/\/pbs.twimg.com\/profile_images\/854678013983707136\/Vb6yqkfW_bigger.jpg\" data-src-1x=\"https:\/\/pbs.twimg.com\/profile_images\/854678013983707136\/Vb6yqkfW_normal.jpg\" \/><\/span><span class=\"TweetAuthor-decoratedName\"><span class=\"TweetAuthor-name Identity-name customisable-highlight\" title=\"St. Louis Fed\" data-scribe=\"element:name\">St. Louis Fed<\/span><\/span><\/a><\/div>\n<\/div>\n<div class=\"TweetAuthor js-inViewportScribingTarget\" data-scribe=\"component:author\"><a class=\"TweetAuthor-link Identity u-linkBlend\" href=\"https:\/\/twitter.com\/stlouisfed\" data-scribe=\"element:user_link\" aria-label=\"St. Louis Fed (screen name: stlouisfed)\"><span class=\"TweetAuthor-decoratedName\"><span class=\"TweetAuthor-verifiedBadge\" data-scribe=\"element:verified_badge\"><b class=\"u-hiddenVisually\">\u2714<\/b><\/span><\/span><span class=\"TweetAuthor-screenName Identity-screenName\" dir=\"ltr\" title=\"@stlouisfed\" data-scribe=\"element:screen_name\">@stlouisfed<\/span><\/a><\/div>\n<\/div>\n<div class=\"Tweet-body e-entry-content\" data-scribe=\"component:tweet\">\n<p class=\"Tweet-text e-entry-title\" dir=\"ltr\" lang=\"en\">Negative interest rates may seem ludicrous, but not if they succeed in pushing people to invest in something more stimulating to the\u00a0economy than government bonds <a class=\"link customisable\" dir=\"ltr\" title=\"http:\/\/bit.ly\/2ASFrRz\" href=\"https:\/\/t.co\/oAzUAA3lS8\" target=\"_blank\" rel=\"nofollow noopener\" data-expanded-url=\"http:\/\/bit.ly\/2ASFrRz\" data-scribe=\"element:url\"><span class=\"u-hiddenVisually\">http:\/\/<\/span>bit.ly\/2ASFrRz<span class=\"u-hiddenVisually\">\u00a0<\/span><\/a><\/p>\n<div class=\"Tweet-metadata dateline\"><a class=\"u-linkBlend u-url customisable-highlight long-permalink\" href=\"https:\/\/twitter.com\/stlouisfed\/status\/941865495132819456\" data-datetime=\"2017-12-16T03:00:07+0000\" data-scribe=\"element:full_timestamp\"><time class=\"dt-updated\" title=\"Time posted: December 16, 2017 03:00:07 (UTC)\" datetime=\"2017-12-16T03:00:07+0000\">10:00 PM &#8211; Dec 15, 2017<\/time><\/a><\/div>\n<\/div>\n<\/blockquote>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<hr \/>\n<p>170 people liked this Tweet.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p><strong>Understanding the Math<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<ul>\n<li>Negative interest rates cannot push people into more stimulating investments.<\/li>\n<li>No matter how negative the rate, someone has to hold every treasury bond and someone has to hold every dollar in circulation.<\/li>\n<li>In the equity markets, for every buyer of stocks, there is a seller, thus the sideline cash argument fails as well.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>It&#8217;s bad enough when analysts fail to understand basic economics, but even Fed economists are clueless about how markets work.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>Negative rates cannot possibly do what the Fed suggests, but they can foster an artificial wealth effect when people borrow or spend more than they should.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>Any economic gain spurred on by reckless borrowing will all be taken back and then some, in the next recession.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p><strong>Zombie Corporations<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>Negative real rates also foster zombie corporations. The BIS defines Zombie firms as those with a ratio of earnings before interest and taxes to interest expenses below one, with the firm aged 10 years or more.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>As it sits, 10% of corporations are zombies, unable to make interest payments from profits.They need cheap money to survive.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>For discussion, please see <a href=\"https:\/\/www.themaven.net\/mishtalk\/economics\/zombie-corporations-10-of-companies-depend-on-cheap-fed-money-6G5uyRJFjUKp37ggNCHyaQ\" target=\"_blank\" rel=\"noopener\">Zombie Corporations: 10% of Companies Depend on Cheap Central Bank Money<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"markdown\">\n<div>\n<div>\n<p>If the St. Louis Fed economists see a sustainable benefit from spurring zombie corporations, they are wrong about that too.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n","protected":false},"excerpt":{"rendered":"<p>St. Louis Fed Promotes the Mathematically Impossible It&#8217;s bad enough when economic writers are clueless about how markets work. It&#8217;s worse when Fed economists are clueless. Check out this Tweet by @StLoiusFed. View image on Twitter St. Louis Fed \u2714@stlouisfed Negative interest rates may seem ludicrous, but not if they succeed in pushing people to [&hellip;]<\/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":[303,17580,5007,14648,13390,13008,3650,2721],"class_list":["post-28991","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fed","tag-fed-economists","tag-mathematics","tag-michael-shedlock","tag-mishtalk","tag-st-louis-fed","tag-us-federal-reserve","tag-us-treasuries"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28991","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=28991"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28991\/revisions"}],"predecessor-version":[{"id":28992,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28991\/revisions\/28992"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=28991"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=28991"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=28991"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}