Inside the Black Hole of Negative Interest Rates

David Haggith

Many nations that experimented with the Fed’s economic recovery plan are now going beyond the outer limits into the twilight zone of negative interest rates. Some of these nations continued to skirt in and out of the edfge of recession throughout their years of economic stimulus; so, now they’ve powered their programs into hyperdrive to see if they can escape the gravity of their circumstances. Their situation appears desperate and hopeless.

Immediately after the Fed’s economic acceleration ended in the US, we’ve watched $3 trillion of paper wealth get sucked into a stock market collapse in less than one-and-half months, and that collapse appears to be accelerating to where the Fed is now talking about negative interest rates, too.

In spite of such talk, we are told the US cannot be in recession because recessions typically begin nine months after a bear market breaks out. That premise may be “typically” true, but what is typical about the present situation? Do things work the typical way when you are crashing back down into a recession you never really escaped? Perhaps the Great Recession was the black hole of all recessions. For all of our efforts, we have not escaped it and feel ourselves pulled right back into it now that we’ve exhausted our fuel on futile financial experiments.

Once nations moved into zero interest rates, we entered such a strange new realm of economics that no one in history has ever experienced this kind of an economy. As nations now move past that bound into negative interest rates, can we really know what is “typical” anymore? I think the word “typical” simply doesn’t apply in our present circumstances. Read more…

—David Haggith

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