# Less than Zero

As the financial crisis of 2008 hit us squarely in the gut, I was telling Mary that it would be interesting to see how the Fed would get interest rates *below* zero. They swung rates to zero so quickly that it was clear if interest rates had to go below zero they would have to invent some new excuse. It would be odd to hear on the new that interest rates had gone “negative,” but I was looking forward to something like that.

Let me say a word about negative numbers: they don’t exist. Or, more correctly, they are a fiction we invent to help us do math, but in the real world, they don’t exist. If you see a negative number in the real world, it simply means zero was put in the wrong place. Is the temperature -20 degrees? That just because we put zero in the wrong place on the F scale.

Today I finally realized how the Fed did it. Watch this piece by John Stewart…

How did the Fed create negative interest rates? Through the secret beyond-TARP program they loaned banks 7 trillion dollars at -3% interest! To create a negative interest rate you have to pay someone to take your money, right? That’s just what they did! By giving banks $7,000,000,000,000 at 0.01% interest, and then borrowing that same money back from banks at 3% interest, the effectively gave money away to the banks: that 3% is the negative interest rate. It is the payment for taking our money.

I’d have to do more digging and math than I have time for right now, but I think we now see how the Fed was able to get the lending rate below zero. I am not so upset about that, but I am incredibly upset that they did this in secrecy. Why not let the public know this was going on? Why not let congress know how big a hole we were in? No wonder this depression is taking so long to crawl out of, it was (is?) nearly a black hole!