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What zero bound? [ClearOnMoney]
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Commentary

What zero bound?

23 Mar 2012 by Jim Fickett.

Economists talk a lot about the zero bound on interest rates limiting the scope of monetary policy. Well, only sort of:

$13bn in 10-year Treasury inflation-protected securities, or Tips, were sold at a negative yield of -0.089 per cent. The sale was a reopening of a benchmark issue sold in January and came as investors have sharply raised their expectations of future inflation.

I fail to see any attraction in TIPS with a negative yield. TIPS give you an increase on your capital equal to the change in the Consumer Price Index – which understates increases in the cost of living – plus the yield, in this case negative. So you are guaranteed, in two ways, to lose money in real terms.

Surely by investing in commodities and solid businesses, bought when they are cheap, you can at least conserve value.

Crazy.