| > ZIRP happened as a long-term back-channel bailout to all the banks & funds holding the downside of the housing & derivatives market collapse. ZIRP happened because the US unemployment rate went to 10%, and when that happens central banks tend to drop rates to help the economy get going again: * https://fred.stlouisfed.org/series/UNRATE That was on the monetary side. On the fiscal side, the GOP refused to pass a large enough stimulus package—what was sent through had a large portion (40%) of tax cuts to win bipartisan support, and those, as predicted, didn't do much. So, as can see in the above graph, it was a long slog to get people employed again. And since the fiscal side didn't do anything (thanks GOP), the Fed had to enact its mandate to fulfil employment, and since rates were already at zero, other measures were done. This is where QE came in, which many (right-leaning) folks said would cause disaster: > We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment. * https://www.hoover.org/research/open-letter-ben-bernanke The Keynesians said this was non-sense. The Keynesians were right (again). And so the long grind to restore employment numbers (while watching inflation) continued for the entirety of the time Obama was in office because the GOP didn't want to help on the fiscal side. And so that left the monetary side and ZIRP and QE. So if you don't want long-term ZIRP on the monetary side, perhaps the fiscal folks should do their jobs. |