“Take some more tea,” the March Hare said to Alice, very earnestly.

“I’ve had nothing yet,” Alice replied in an offended tone, “so I can’t take more.”

“You mean you can’t take less,” said the Hatter: “it’s very easy to take more than nothing.”

“Nobody asked your opinion,” said Alice.”

-Lewis Carroll, Alice in Wonderland

It used to be, you see, on Wall Street that no one expected you to take less than nothing. We had the obviously silly idea that that Zero was Zero and, if you were borrowing money, that you would have to pay the lender for getting the money. Now I have been on Wall Street for a very long time but even before that, for thousands of years, no one ever thought that the lender would pay the borrower for the privilege of lending him money. What a silly thought that was and if you expressed it, you were sure to be laughed out of the room.

I am not sure what the privilege is, lending someone money, and paying to do it, but there must be one. Perhaps if you don’t do it then the government will not allow you to manage their pension money, and get paid for it. Perhaps the government will not allow you to participate in issuing their debt and collecting a fee. No one talks about this, of course, because it is not polite conversation, and no one wants to see any mention of any of this in the Financial Times or the Wall Street Journal.

If you think I am daft or have run amok, then please allow me to show you what various nations are paying to borrow money for two years:


United Kingdom -0.068%

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France -0.614%

Germany -0.678%

Italy -0.108%

Spain -0.476%

Netherlands -0.636%

Switzerland -0.866%

Japan -0.118%

United States +0.127%

*Data according to Bloomberg

It makes all of the sense in the world, of course, that the nation with the largest economy, and the largest bond market, is paying more than most of the other countries in the world to borrow money. The Federal Reserve could always change that, of course, as we are only 12.7 basis point above Zero but then Chairman Powell could be accused of not just standing at the entrance to Wonderland but plunging down the Rabbit hole, with the rest of the central bankers, and finding Alice, who escorts him to the Mad Hatter’s tea party.

“The rule is, jam to-morrow and jam yesterday-but never jam to-day.”

“It must come sometimes to jam today,” Alice objected.

“No, it can’t,” said the Queen. “It’s jam every other day, today isn’t any other day, you know.”

– Wonderland

Now one can make a case, a reasonable case, that during our medical and financial pandemic that the central bank of the United States should lower the government’s borrowing costs as much as possible. After all, it is the size of the debt, times the interest rate paid to obtain it, that the citizens of the United States will have to pay for, eventually. Perhaps the Fed is being very wise, at staying just this side of Zero, as it allows us to attract foreign money to help fund the country, as our interest rate is marginally better than theirs.

Then there is the new direction of the Fed. They are buying corporate bonds, ETFs, high yield bonds, municipal bonds and what could be next, equities, or controlling the yield curve or providing loans to seniors, or retirees, that are at a higher yield than anyone else. Nothing is out of the question any longer. Nothing is off the table. We have breached the lines drawn in the sand, since the Fed’s inception in 1913, and there is no going back.

“But,” said Alice, “if the world has absolutely no sense, who’s stopping us from inventing one?”

– Lewis Carroll

You see, since the world’s central banks can make money from nothing more than a computer keystroke, and then spend it how they like, they discovered in the financial crisis of 2008/2009 that Zero was no longer Zero and that “less than nothing” was indeed a very real possibility. They didn’t think it could be done before, but now they know that it can, and so they are doing it. If you don’t think this is Wonderland, then you need new glasses and a hearing aid or perhaps you aren’t old enough to have shaved yet.

For, you see, so many out-of-the-way things had happened lately, that Alice had begun to think that very few things indeed were really impossible.

– Lewis Carroll

Look around. Consider where our economy is, where yields are, where the equity market is, the number of new companies being brought to market with no revenues or earnings and the truth stands-out. Nothing is really impossible.

Who knew?