Fed Hangs Recovery Hopes on Nothing

Cutting benchmark rate to zero points up risks of plenty of nothing
By Jim O'Neill,  Newser Staff
Posted Dec 18, 2008 11:42 AM CST
Fed Hangs Recovery Hopes on Nothing
Zero percent interest rate availability is draped on the side of an unsold 2008 Denali at a GMC Truck dealership in Littleton, Colo., on Sunday, July 13, 2008.    (AP Photo/David Zalubowski)

Nada. Naught. Zip. Zero, as in the 0% interest the Federal Reserve is asking banks to pay—or, rather, not pay—for short-term loans. What does getting zero back for loaning money mean, wonders Paul Farhi of the Washington Post. "The strategy is to hose down America's sclerotic financial system with so much cash that banks, in turn, will start making loans themselves," he explains.

The concept of zero, with its "kind of spooky ways," dates to Babylonian times, Farhi writes. And now it's raising as many questions as it answers: "Can nothing save us? Is nothing good? Have we been held back for too long by something that, once removed, will make things a whole lot better?" (More Federal Reserve stories.)

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