MY COLUMN this week sets out three possible scenarios for the American economy in 2016, in the aftermath of the Fed's first rate hike in more than nine years. Each scenario corresponds to an understanding of why it is that near-zero interest rates are so difficult to leave behind; economies eventually managed the trick in the decades after the Depression, but those that have sunk to the zero lower bound in recent years have been unable to escape it for long.
What strikes me as interesting, and what motivated the column, is that our understanding of the pull of near-zero rates has evolved since late 2008, and continues to evolve, in a very ominous direction.
Back in late 2008 and early 2009, when rates around the rich world fell below 1%, the framework most economists reached...Continue reading
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