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Deflation, negative interest rates and the derivatives mountain

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  In a press conference last week, Fed Chair Janet Yellen was asked about negative interest rates. Yellen dismissed the possibility, but also said if "we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools, and [a negative rate] would be something that we would evaluate in that kind of context."

 Just a week later 1-month Treasury bill yields went negative, without the Fed even doing anything.

 photo 3month_zpstlvdfkxu.jpg

  This may not sound like much, but in monetary policy negative interest rates are the military equivalent of a thermonuclear bomb.
  It's extremely important to understand what negatives interest rates are and why this is happening.


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