Zero Bound

Maybe someday
Saved by zero
I'll be more together
--The Fixx

One of the many nice points made by David Stockman here is that central banks do not balance monetary policy at neutral over the long haul. Instead, policy is biased toward 'easy.'

During the past 300 months (25 yrs), the Fed has either cut or kept Fed Fund rates flat 80% of the time. It has not raised rates in 108 months (9 yrs). Fed Fund rates have been essentially zero for 78 months (6.5 yrs).

After cutting rates, the Fed never raises rates back to where they were previously (as demonstrated in graph above). Over time, central bank policy migrates toward the zero bound.

We're there now. And it could have easily been forecast decades ago.