There is no such thing as a natural negative interest rate

Yet another Krugman: 

Laubach and Williams find that the natural rate has plunged in recent years, and is now very, very low. The particular statistical method they use is reasonable, but in any case — as they document — the result pops out for pretty much any plausible methodology. ...

L-W attribute the decline in the natural rate largely to the slowing of potential output, which in turn reflects demography and what looks like a slowdown in technological progress. That’s more speculative. But the low natural rate is as solid a result as anything in real time can be.

 Krugman shows the chart to the left. He is quoting Laubach and Williams from the Federal Reserve research division.

The MIT Basket Weaving assumption is that we live forever, have instantenous knowledge3 from the Fed target, and we make infinitely indivisible purchase.  These are the Euler aswumptions and let the Basket Weavers use Newton's grammar.  Under these assumption the economic matrix is symmetrical, transactions are micro reversible.  None of these assumptions apply.  What applys is Peter Keevosh working this problem:

Fifteen young ladies in a school walk out three abreast for seven days in succession: it is required to arrange them daily, so that no two shall walk twice abreast.

The Fed cannot get 15 school girls a walking because the Fed has to deal with the US Senate as a required, but dysfunctional member bank.  So we have all the private member banks betting on deposits and the US Senate betting on a six year loan at 1/2% and a 15% tax on the bond industry in the form of remits.   So the Fed is changing rates on a yearly schedule because its main member bank, the US Senate, works a yearly budget, not a quarterly. Hence the short term rates, as seen by the Fed, are non existant; the bond market has adapted to tyhe slow update schedule at the Fed. In a Euler model the symmetry requires the model generate negative rates.  Interesting but mis-named.

Do we ever get negative rates?  For a month or two when we are crashing.  The MIT Basket Weavers have a recession scheduled for Q1 2016, watch the yield curve during the planned crash.