The market's zero-sum game

Near-zero interest rates may have stimulated markets briefly, but central banks will likely find that extended periods of ultra-cheap money will ultimately impede recovery.

Gresham’s law needs a corollary. Not only does "bad money drive out good,” but cheap money may as well. Ultra low, zero-bounded central bank policy rates might in fact de-lever instead of re-lever the financial system, creating contraction instead of expansion in the real economy. Just as Newtonian physics breaks down and Einsteinian concepts prevail at the speed of light, so too might easy money policies fail to stimulate at the zero bound.

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