Trapped inside the zero bound: What it means now that we’ve crossed the economic event horizon
Basically I talk about the four big consequences as I see them of ZIRP and NIRP and the possibility that not only are interest rates artificially repressed (we all know that), but the growing realization that the Fed is truly trapped and that rates can never be normalized. (As per some of the recent featured voices episodes here, Kyle Bass interviews, etc)
Is this a good time to mention the connection between a financial system that charges interest on debt and how that interest charged requires GDP Growth? This was a key point Chris Martenson always made in the Crash Course.
If as many suspect we have entered into a world where Growth Is Now Dead, wouldn’t we therefore expect to see that interest rates would need to fall to Zero? And if the economy begins to shrink would interest rates begin to go negative?
But then again we get into the other issues of who suffers versus who prospers from this situation.
A shrinking economy implies we are generally ALL of us getting a little poorer each year but, wouldn’t you know it, the sharks figured out how to gorge themselves on the drowning passengers of this Sinking Ship.