Here Goes Nothing: Zero Is Historically A Magical Innovation, But Can It Cure The Economy?
Paul Farhi
How do you know things have gotten really, really bad? You know because we have gotten to zero.
Zero is the low beneath which there is no more low. It is nada. Naught. The absence of a thing. Zero: A losing score (blanked! shut out!). A depleted bank account. Less than the bare minimum. Zero: the big fat loser.
Zero is the rate the Federal Reserve says it will now start charging (or actually, not charging) commercial banks for very short-term loans. (To be precise, the new target rate is between 0 and 0.25 percent.) The government is in essence saying, You can have our money if you'll just give it back later, no strings (or interest) attached. Not even a "convenience charge." In its continuing efforts to defibrillate the economy, the Fed has now compelled the financial world (or what's left of it) to confront . . . nothing.
The idea of zero seems caveman simple. Humans have understood nothingness since they first gazed upon an empty larder, though the mathematical notation of "zero" took a few millenniums of civilization to come into its own. It seems pretty obvious now (you took arithmetic, after all), but imagine the ancient mind trying to grasp the notion that no food, no animals and no fire could all be represented by the same abstraction.
Zero has a complicated history, and a murky one. Much of the historical record on the subject is sparse, noted Bill Casselman, a mathematician at the University of British Columbia, in a recent issue of the American Mathematical Society's newsletter.
"The first problem to come along is deciding exactly what one means by 'zero' or, for that matter, '0,' " he wrote. "Is it a number in the mathematical sense -- that is to say, the cardinality of the empty set? The length of a point? The result of subtracting 1 from 1?"
The Babylonians living around what is now Iraq apparently got there first, putting a symbol for zero in their cuneiform tablets around 2000 B.C., according to Robert Kaplan, author of "The Nothing That Is: A Natural History of Zero." The zero symbol became a way to distinguish similar-looking but greatly differing quantities, such as 686 and 6086.
Others -- the Mayans in Central America, the Hindu cultures of India -- came up with a similar concept later, apparently independently of one another. Western Europeans were among the last to embrace the big 0; the idea wasn't widespread until around the 12th century, after the dissemination and translation of Arabic math texts.
As digits go, zero acts in kind of spooky ways. Nothing subtracted from something leaves the exact same something. But anything multiplied by zero leaves zero. Zero can be divided by any number but it can't divide into anything. Zero to the zero power takes one down an endless wormhole of abstraction.
Above all, zero is necessary. Without zero, all the complicated math you tried to avoid in school wouldn't be possible. Nor would bookkeeping and commerce. Nor would physics and chemistry and much of modern science, including the language of computers -- written as 1's and 0's.
We must have nothing, lots and lots of nothing, before so much more is possible.
"If you look at zero you see nothing; but look through it and you will see the world," Kaplan wrote. "For zero brings into focus the great, organic sprawl of mathematics, and mathematics in turn the complex nature of things."
Which brings us around to the Fed's approach to zero. The Fed is making it not just cheap for banks to borrow, but rather free. The strategy is to hose down America's sclerotic financial system with so much cash that banks, in turn, will start making loans themselves. In this, the Fed's rate-vaporizing action is like a variation on the ancient joke about a failing business: How do they do it if they lose money on every sale? Volume!
The unprecedented move triggers a set of questions that force us to confront the void: 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?
Investors have already had a taste of nothing. Treasury bills have been driven so low these days that they are yielding zero. But zero looks good when you consider the alternatives. It sure beats going negative.
Paul Farhi
How do you know things have gotten really, really bad? You know because we have gotten to zero.
Zero is the low beneath which there is no more low. It is nada. Naught. The absence of a thing. Zero: A losing score (blanked! shut out!). A depleted bank account. Less than the bare minimum. Zero: the big fat loser.
Zero is the rate the Federal Reserve says it will now start charging (or actually, not charging) commercial banks for very short-term loans. (To be precise, the new target rate is between 0 and 0.25 percent.) The government is in essence saying, You can have our money if you'll just give it back later, no strings (or interest) attached. Not even a "convenience charge." In its continuing efforts to defibrillate the economy, the Fed has now compelled the financial world (or what's left of it) to confront . . . nothing.
The idea of zero seems caveman simple. Humans have understood nothingness since they first gazed upon an empty larder, though the mathematical notation of "zero" took a few millenniums of civilization to come into its own. It seems pretty obvious now (you took arithmetic, after all), but imagine the ancient mind trying to grasp the notion that no food, no animals and no fire could all be represented by the same abstraction.
Zero has a complicated history, and a murky one. Much of the historical record on the subject is sparse, noted Bill Casselman, a mathematician at the University of British Columbia, in a recent issue of the American Mathematical Society's newsletter.
"The first problem to come along is deciding exactly what one means by 'zero' or, for that matter, '0,' " he wrote. "Is it a number in the mathematical sense -- that is to say, the cardinality of the empty set? The length of a point? The result of subtracting 1 from 1?"
The Babylonians living around what is now Iraq apparently got there first, putting a symbol for zero in their cuneiform tablets around 2000 B.C., according to Robert Kaplan, author of "The Nothing That Is: A Natural History of Zero." The zero symbol became a way to distinguish similar-looking but greatly differing quantities, such as 686 and 6086.
Others -- the Mayans in Central America, the Hindu cultures of India -- came up with a similar concept later, apparently independently of one another. Western Europeans were among the last to embrace the big 0; the idea wasn't widespread until around the 12th century, after the dissemination and translation of Arabic math texts.
As digits go, zero acts in kind of spooky ways. Nothing subtracted from something leaves the exact same something. But anything multiplied by zero leaves zero. Zero can be divided by any number but it can't divide into anything. Zero to the zero power takes one down an endless wormhole of abstraction.
Above all, zero is necessary. Without zero, all the complicated math you tried to avoid in school wouldn't be possible. Nor would bookkeeping and commerce. Nor would physics and chemistry and much of modern science, including the language of computers -- written as 1's and 0's.
We must have nothing, lots and lots of nothing, before so much more is possible.
"If you look at zero you see nothing; but look through it and you will see the world," Kaplan wrote. "For zero brings into focus the great, organic sprawl of mathematics, and mathematics in turn the complex nature of things."
Which brings us around to the Fed's approach to zero. The Fed is making it not just cheap for banks to borrow, but rather free. The strategy is to hose down America's sclerotic financial system with so much cash that banks, in turn, will start making loans themselves. In this, the Fed's rate-vaporizing action is like a variation on the ancient joke about a failing business: How do they do it if they lose money on every sale? Volume!
The unprecedented move triggers a set of questions that force us to confront the void: 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?
Investors have already had a taste of nothing. Treasury bills have been driven so low these days that they are yielding zero. But zero looks good when you consider the alternatives. It sure beats going negative.
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