Monday, February 28, 2011

There are always zero interest rates

The curve does not extend to infinity. Sumner makes the usual canard about zero interest rates.

When economists talk about Zero Interest rates, they mean a yield curve that would cause some bonds to go belly up because the borrower is belly up. He is really back to the Great Exogenous, some government bond god that insures no defaults can happen to the Lords favorite lenders.

Iceland didn't bother with the Great Exogenous, they just let the bond holders go belly up, and more power to them.  My county here in Fresno is about to go belly up, and some existing lenders will realize losses, unless we can pass the losses on up Congress.  Anybody in the Tea Party want to cover a billion in potential bond haircuts?

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