Happy ZIRP Day, Ben Bernanke

(Or maybe “ZIRP!  Pow!  Right in the kisser!”)

So the Fed has reached the end of its conventional rope — or string, as it were — and cut the formal target to “0 to ¼ percent”.  Do I get partial credit for predicting 0.125?

Speaking of Japan, USD/JPY is now arguing with 89.  Remarkably, this has not caused the world to end.  Yet.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.

I nominate “quantitative easing” for phrase of the day.

In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

Apparently, “some time” means 20 or 30 years.   10-year Treasuries closed at 2.363%.  30-year at 2.874%. (I guess I should have bought them earlier today).

We are nearing the point where I would be willing to short this market.


Krugman says, “Seriously, we are in very deep trouble.”


“The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding,” William Poole, former president of the St. Louis Fed and now a senior fellow at the Cato Institute in Washington, said in an interview with Bloomberg Television.

The Bank of Japan has been the only major central bank in modern times to mix a policy of steep rate reductions with quantitative easing, or the strategy of injecting more reserves into the banking system than needed to keep the target rate at zero.

Japan’s central bank kept its main rate at zero from 2001 to 2006 while flooding the banking system with extra cash to encourage lending, spur growth and overcome deflation. The abundant funds failed to prompt lending by commercial banks, which expanded their reserves at the central bank almost nine times by early 2004.

I guess we are going to find out whether it did not work in Japan because they did not push hard enough, or if it did not work in Japan because it doesn’t work.

See also The Fed Speaks: More on Today’s Decision. (The Fed held an unusual media conference call following today’s FOMC meeting.)

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