{"id":39161,"date":"2018-10-15T10:54:22","date_gmt":"2018-10-15T15:54:22","guid":{"rendered":"http:\/\/olduvai.ca\/?p=39161"},"modified":"2018-10-15T10:56:59","modified_gmt":"2018-10-15T15:56:59","slug":"39161","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=39161","title":{"rendered":"Choking On the Salt of Debt"},"content":{"rendered":"
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Choking On the Salt of Debt<\/a><\/h3>\n

Life After ZIRP<\/strong><\/p>\n

Roughly three years ago, after traversing between Los Angeles and San Francisco via the expansive San Joaquin Valley, we penned the article,\u00a0Salting the Economy to Death<\/a>.\u00a0 At the time, the monetary order was approach peak ZIRP.<\/p>\n

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\"\"Our boy ZIRP has passed away. Mr. 2.2% effective has taken his place in the meantime. [PT]<\/p>\n

We found the absurdity of zero bound interest rates to have parallels to the absurdity of hundreds upon hundreds of miles of blooming crop fields within the setting of an arid desert wasteland.<\/p>\n

Given today\u2019s changing financial conditions, namely the prospect of a sustained period of rising interest rates, we have taken the opportunity to refine our analysis.\u00a0 What follows is an attempt to bring clarity to disorder.<\/p>\n

The natural starting point for the topic at hand is from a place of delusion.\u00a0That is, the popular delusion that central planners can stimulate robust economic growth by setting interest rates artificially low.\u00a0The general theory is that cheap credit compels individuals and businesses to borrow loads of cash \u2013 and consume.<\/p>\n

Over a sample size of five to ten years, say the growth half of the business cycle, central bankers can falsely take credit for engineering a productive economy.\u00a0 Profits increase.\u00a0 Jobs are created.\u00a0 Wages rise.\u00a0 A cycle of expansion takes root.\u00a0 These are the theoretical benefits to an economy that central bankers claim they impart with just a little extra liquidity.\u00a0 In practice, however, this policy antidote is a disaster.<\/p>\n

Without question, cheap credit can have a stimulative influence on an economy with moderate debt levels.\u00a0But once an economy has reached total debt saturation, where new debt fails to produce new growth, the cheap credit trick no longer works to stimulate the economy.\u00a0 In fact, the additional credit, and its flip-side debt, distorts prices and strangles future growth.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Choking On the Salt of Debt Life After ZIRP Roughly three years ago, after traversing between Los Angeles and San Francisco via the expansive San Joaquin Valley, we penned the article,\u00a0Salting the Economy to Death.\u00a0 At the time, the monetary order was approach peak ZIRP.   Our boy ZIRP has passed away. Mr. 2.2% effective […]<\/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":[5728,195,303,431,11763,534,3650,1940,1939],"class_list":["post-39161","post","type-post","status-publish","format-standard","hentry","category-economics","tag-acting-man","tag-debt","tag-fed","tag-interest-rates","tag-mn-gordon","tag-monetary-policy","tag-us-federal-reserve","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39161","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=39161"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39161\/revisions"}],"predecessor-version":[{"id":39163,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39161\/revisions\/39163"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39161"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}