Why negative nominal rates may be the Fed’s next big move

This crisis has broken a lot of economic taboos, with central banks buying up assets and expanding their balance sheets in a desperate effort  to reflate a debt-laden private sector. The goal is to maintain economic growth, even at the risk of releveraging within the private sector to make up for a loss of private income-based demand. I think things can go a lot further.
For the time being, ideas like debt forgiveness and fostering increased savings rates to reduce private sector debt burdens are off the table. The emphasis now in policy circles is reflation. And that means higher asset prices to minimize the impact of deleveraging in the hopes that income-based demand can replace credit-based demand as a driver of the economy as the Fed's reflation buys time. My view is that this policy ...


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