Hilserath: Among 65 economists surveyed by The Wall Street Journal this month, not all of whom responded, more than half said it was somewhat or very likely the Fed's benchmark federal-funds rate would be back near zero within the next five years. Ten said the Fed might even push rates into negative territory, as the European Central Bank and others in Europe have done--meaning financial institutions have to pay to park their money with the central banks.
Traders in futures markets see lower interest rates in coming years than the Fed projects in part because they attach some probability to a return to zero. In December 2016, for example, the Fed projects a 1.375% fed-funds rate. Futures markets put it at 0.76%.
Among the worries of private economists is that no other central bank in the advanced world that has raised rates since the 2007-09 crisis has been able to sustain them at a higher level. That includes central banks in the eurozone, Sweden, Israel, Canada, South Korea and Australia.
"They effectively have had to undo what they have done," said Susan Sterne, president of Economic Analysis Associates, an advisory firm specializing in tracking consumer behavior.
Whoops. Debt/GDP, consolidated is 350% says the Fed. That means at 3% growth rate the economy will use all the growth to pay off interest debt when the rollover hits. The one year Treasury is about .65 today. So we have bankruptcy time, the only way to discharge debt. That means a bit worse recession than the Kanosians originally planned.
HT to ZeroHedge for reminding us of the problem.
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