I remember back in 1979 when Walter Cronkite announced that for the first time in history the prime rate was in double digits. Walter’s no longer here, but I can imagine he would take off his glasses and address the nation as a trusted source; we would all know something historic was happening. Like the Kennedy assassination or landing on the moon. The news is no longer a trusted source but I can assure you this is something historic. Negative interest rates are about to become a thing in the United States as it already is a thing around the rest of the globe.
No one knows exactly what realm negative interest rate policy (NIRP) will lead us into but as the central banks confess, NIRP is experimental. The real problem is the words central banking and experimental don’t belong in the same sentence. As the anomalies in the financial system continue to mount, a paradigm shift might not be far behind. But for a true blue Kuhnian paradigm shift to occur it requires 1) a crisis and; 2) a better model. So far we have avoided the crisis… note the use of “so far” and there don’t seem to be any models to replace the current one. Whatever it is, whenever it emerges, we are definitely going to need a bigger boat.