Fed Aims for Zero - and May Hit It
Did I read and hear this right?
Did the Fed just set a range of ZERO percent for interest rates?
Ladies and gentlemen, you may now take all the money out of your bank accounts, stack and tie it into bundles, and put it into the fireplace.
Because very soon, it may well be worth less than the wood you’re now using.
The rise in the dollar vis a vis other currencies? Kiss it goodbye.
The drop in gas prices? A mere fading mirage.
Falling consumer prices? Enjoy them while they last.
A former boss of mine once said that if you aim for nothing, you’ll hit it every time.
If the Fed aims for zero, it might end up doing the same for our economy.
With the stock market tanking, a zero interest rate will be a signal to savers that they might as well just spend their money (if they decide not to burn it), since there will be no place to get a return on their holdings. Money that otherwise might have flowed to savings and investment, looking for a higher return, will go to non-productive consumption.
Zero interest is a signal to lenders that any semblance of responsibility has gone out the window. Subprime lending? How do you get any more sub than zero? Pay people to take your money?
Zero interest is a signal to foreign investors to pull their money out of the US economy and from the dollar, which will lose all credibility as a store of value.
Zero interest, combined with trillions in”stimulus” spending, is the Road to Zimbabwe without Crosby, Hope and Lamour.
Get ready for a long, steep descent into economic darkness.
UPDATE: Michelle Malkin, as always, states the case more colorfully!
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I saw this morning that people *are* actually paying the treasury to take their money, accepting a negative return on t-bills because getting SOME of their money back is actually better than the alternative.
I keep expecting Curly to be appointed the next chairman of the Fed.
It’s a Three Stooges economic policy for sure. I don’t think the Obamites could do much worse.
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