Global ZIRP (Zero Interest Rate Policy): End Of A Failed Philosophy?

The race to zero inflation, zero policy rates is on in the developed world. Cash is and will pour into bond funds providing low risk/any return. As someone said, the developed world bonds are providing Return-free risk not Risk-free return. Expect the Indian yield curve to react as global deflation pierces the borders at full force. Indian Public Sector Banks have huge bond holdings.

Global inflation has been defeated in the near term, not by policy but by global stupidity. Oh well, we might as well look on the bright side. The governing philosophy has been that expectation and perception rule the world;  the Kantians have been teaching this to our kids for the past 40 years.

It turns out that there is a thing called ‘Reality’ and it does not give a wit about your perception and expectation. The shock is not that markets have crashed, prices are deflating, and none of our prescriptions is working on the patient. No, the shock is that we have to face reality, one that we did not know existed, one that we have denied.

We can no longer act on the basis of expectation or perception. We have to act on the basis of reality. Unfortunately, the machinery of the developed world is still making policy based on a defunct philosophy. They are trying to create perception and manage expectations.

It is not to be.

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