Category Archives: Presidential campaign

China Stealing Land, Exploiting it

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In part, JapanTimes: It’s the first time the leaders of Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia have held a stand-alone meeting in the U.S. China is not an ASEAN member, but its territorial claims over disputed waters have raised international concerns and heightened tensions with some member countries.

Obama said trade between the U.S. and ASEAN had increased 55 percent since he took office. The region is now the U.S.’s fourth-largest goods trade partner. U.S. companies are also the largest source of foreign investment in its member nations, he said.

Obama said he wants to build on that progress “so that growth and development is sustainable and inclusive and benefits all people.” More here.

China Reclaimed Land for South China Sea Anti-Submarine Helicopter Base Near Vietnam

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PLAN Chinese Z-18F Anti-Submarine Helicopter

PLAN Chinese Z-18F Anti-Submarine Helicopter

The People’s Liberation Army is building a South China Sea helicopter base that could be a key node in a Chinese anti-submarine warfare (ASW) network across the region, according to new satellite images and analysis shared with USNI News on Friday.

The imagery — first published on news site The Diplomat — show what appears to be extensive reclamation work to build could easily be an ASW helicopter base on Duncan Island, about 200 miles from the coast of Vietnam in the disputed Paracel Islands.

The base “could signal a step-up in China’s ASW capabilities across the South China Sea. A network of helicopter bases and refueling stops scattered across the South China Sea, using no more than the bases China is already known to be building, would make almost any coordinate in the sea reachable,” read the analysis by Victor Robert Lee.
“By hopscotching between bases, the [ASW] helicopter fleet would be unconstrained by fuel range or limited numbers of ship-borne landing berths, creating a continuous and contiguous web of surveillance and response capability.”

thediplomat_2016-02-12_15-55-05The analysis went on to say “such a web would have utility beyond anti-submarine warfare, and would probably reshape surface ship and aerial combat strategies in the region,” Lee wrote.

In reaction to the revelation, Pentagon officials reiterated their call for all South China Sea nations to island reclamation work, in a Sunday statement to USNI News

“The United Sates continues to call on all claimants to halt land reclamation, construction and militarization of features in the South China Sea,” spokesman Cmdr. Bill Urban told USNI News. “While the United States does not take a position on sovereignty claims to land features, we have growing concerns about China’s pattern of assertive behavior, which creates uncertainties about China’s strategic intentions.”

Naval analyst Eric Wertheim told USNI News last week, if the analysis holds up, it would give the Chinese more military options regionally.

“If it turns out to be true. It’s another example of China excreting its effort to control the South China Sea,” the author of the U.S. Naval Institute’s Combat Fleets of the World said.
“From a military perspective it certainly has an impact as these bases can serve as unsinkable aircraft carriers.”

According to Wertheim, the bases could sustain and act as lily pads for the PLAN’s new Changhe Z-18F ASW variant – based on the French SA 321 Super Frelon heavy lift helicopter – which have a range of 450 nautical miles. The Duncan Island installation would put the helicopters easily in range of Vietnam’s maritime territory.

thediplomat_2016-02-12_15-55-13In September, Pacific Command commander Adm. Harry Harris told the Senate how he viewed the expanded installations across the entire region.

“If you look at all of these facilities — and you could imagine a network of missiles sites, runways for their fifth generation fighters and surveillance sites and all that — it creates a mechanism in which China would have de facto control over the South China Sea in any scenario short of war,” Harris said.
“These are obviously easy targets in war, it’s what we call in the military, “grapes” if you will, but short of that, the militarization of these features pose a threat against all other countries in the region.”

News of the base comes as Vietnam is in the midst of modernizing its submarine force to include six Russian-built improved Kilo-class diesel electric attack submarines. The submarines, acquired for the maritime defense of Vietnam’s substantial coastline, are part of a Hanoi naval expansion that would assert Vietnam claims in the region.

The disparity between the Vietnamese Navy and the PLAN and China’s heavily armed coast guard ships, was highlighted in 2014. That May, China sent a $1 billion offshore oil platform inside Vietnam’s disputed economic exclusion zone (EEZ) and had ringed it with ships to prevent challenges. If China, for example, made a similar attempt in the future, it could make it riskier for Vietnams reconstituted submarine force to intercede with closer ASW helicopters.

While the reclamation work in the Paracels – where last month the U.S. sent the guided missile destroyer USS Curtis Wilbur (DDG-54) on a freedom of navigation operation – is not as controversial as the ongoing work the Chinese have done to build artificial islands in the Spratly Islands near the Philippines.

In the last two years China has turned low tide elevations into military-style installations – though China insists they aren’t for military use.

Victor Robert Lee image.The Chinese controlled territories in the Paracels – on the other hand – are recognized land features that China has controlled since the mid-1970s while Vietnam and Taiwan also have claims.

In addition expanding the territory on Duncan Island by more than 50 percent in the last year, China has also expanded its Paracel holdings at its airbase at Woody Island, North Island and Tree Island.

“The recent developments at Tree, North, and Duncan islands indicate that Beijing is augmenting its position in the Paracels, which have been overshadowed of late by China’s epic construction projects in the Spratlys,” Lee wrote.
The changes in progress will in the Paracels “probably reshape surface ship and aerial combat strategies in the region.”

Strategic Implications of the Transpacific Partnership

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Document: Report to Congress on Strategic Implications of the Trans-Pacific Partnership

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Summary

 
On October 5, 2015, Ministers of the 12 Trans Pacific Partnership (TPP) countries announced conclusion of their free trade agreement (FTA) negotiations. The agreement is one of the Obama Administration’s signature trade policy initiatives, an effort to reduce and eliminate trade and investment barriers and establish new rules and disciplines to govern trade and investment among the 12 countries. TPP proponents, including Administration officials, argue that the proposed TPP would have substantial strategic benefits for the United States in addition to its direct economic impact. They argue that the agreement would enhance overall U.S. influence in the economically dynamic Asia –
Pacific region and advance U.S. leadership in setting and modernizing the rules of commerce in the region and potentially in the multilateral trading system under the World Trade Organization (WTO).
 
Congress plays a key role in the TPP. Through U.S. trade negotiating objectives established in Trade Promotion Authority (TPA) legislation and informal consultations and oversight, Congress has guided the Administration’s negotiations. Ultimately, Congress would need to pass implementing legislation if the concluded agreement is to take effect in the United States. The geo- political arguments surrounding TPP are widely debated, as are the arguments about its  potential economic impact. To some, the TPP is an important litmus test of U.S. credibility in the Asia-Pacific region. As the leading economic component of the Administration’s “strategic rebalancing” to the region, the TPP, proponents argue, would allow the United States to reaffirm existing alliances, expand U.S. soft power, spur countries to adopt a more U.S. friendly foreign  policy outlook, and enhance broader diplomatic and security relations. Many Asian policymakers  – correctly or not – could interpret a failure of TPP in the United States as a symbol of the United States’ declining interest in the region and inability to assert leadership. Some critics argue that TPP backers often do not identify specific, concrete ways that a successful deal would invigorate U.S. security partnerships in the region, and that an agreement should be considered solely for its economic impact. They maintain that past trade pacts have had a limited impact on broad foreign policy dynamics and that U.S. bilateral relations are based on each country’s broader national interests.
 
The Administration is also pursuing strategic economic goals in the TPP. Through the agreement,  proponents argue, the United States can play a leading role in “writing the rules” for commerce with key trading partners, addressing gaps in current multilateral trade rules, and setting a  precedent for future regional and bilateral FTA negotiations or multilateral trade talks at the World Trade Organization (WTO). The core of this argument is the assertion that the TPP’s  potential components – including tariff and non tariff liberalization, strong intellectual property rights and investment protections, and labor and environmental provisions – would build upon the U.S. led economic system that has expanded world trade and investment enormously since the end of World War II.
 
Although most U.S. observers agree it is in the U.S. interest to lead in establishing global and regional trade rules, less consensus exists on what those rules should be, yielding some criticism on the strength and breadth of various TPP provisions. In addition, some argue that crafting new rules through “mega regional” agreements rather than the WTO could undermine the multilateral trading system, create competing trading blocs, lead to trade diversion, and marginalize the countries not participating in regional initiatives.

The Next Border Fence

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Apparently, they do work and have some significant value, in Europe that is. With the constant flow of migrants, several major problems have literally cracked the security of countries.  Further, there are no signs that migrants flowing into Europe will wane or stop at all, so the true costs in 2016 or beyond. The immigration flood in Europe is a clarion call to the United States as the issues are virtually the same. Not only is the United States taking in Middle Eastern refugees, but we have been taking in Cubans, Mexicans, as well as Central and South Americans. For America is goes much further that a trifecta and costs and security.

Anti-migrant force builds in Europe, hurting Merkel’s quest

WARSAW, Poland (AP) — So where should the next impenetrable razor-wire border fence in Europe be built?

Hungary’s right-wing Prime Minister Viktor Orban thinks he knows the best place – on Macedonia’s and Bulgaria’s borders with Greece – smack along the main immigration route from the Middle East to Western Europe. He says it’s necessary because “Greece can’t defend Europe from the south” against the large numbers of Muslim refugees pouring in, mainly from Syria and Iraq.

The plan is especially controversial because it effectively means eliminating Greece from the Schengen zone, Europe’s 26-nation passport-free travel region that is considered one of the European Union’s most cherished achievements.

Orban’s plan will feature prominently Monday at a meeting in Prague of leaders from four nations in an informal gathering known as the Visegrad group: Hungary, Poland, the Czech Republic and Slovakia. The Visegrad group, formed 25 years ago to further the nations’ European integration, is marking that anniversary Monday. Still, it has only recently found a common purpose in its unified opposition to accepting any significant number of migrants.

This determination has emboldened the group, one of the new mini-blocs emerging lately in Europe due to the continent’s chaotic, inadequate response to its largest migration crisis since World War II. The Visegrad group is also becoming a force that threatens the plans of German Chancellor Angela Merkel, who wants to resettle newcomers across the continent while also slowing down the influx.

“The plan to build a new “European defense line” along the border of Bulgaria and Macedonia with Greece is a major foreign policy initiative for the Visegrad Four and an attempt to re-establish itself as a notable political force within the EU,” said Vit Dostal, an analyst with the Association for International Affairs, a Prague based think tank.

At Monday’s meeting, leaders from the four nations will be joined by Macedonian President Gjorge Ivanov and Bulgarian Prime Minister Boiko Borisov so they can push for the reinforcements along Greece’s northern border. Macedonia began putting up a first fence in November, and is now constructing a second, parallel, fence.

“If it were up only to us Central Europeans, that region would have been closed off long ago,” Orban said at a press conference recently with Poland’s prime minister. “Not for the first time in history we see that Europe is defenseless from the south … that is where we must ensure the safety of the continent.”

Poland has indicated a willingness to send dozens of police to Macedonia to secure the border, something to be decided at Monday’s meeting.

“If the EU is not active, the Visegrad Four have to be,” Slovak Prime Minister Robert Fico said recently. “We have to find effective ways of protecting the border.”

The leaders will try to hash out a unified position ahead of an important EU meeting Thursday and Friday in Brussels that will take up both migration and Britain’s efforts to renegotiate a looser union with the EU. The Visegrad countries have also recently united against British attempts to limit the welfare rights of European workers, something that would affect the hundreds of thousands of their citizens who now live and work in Britain.

The anti-migrant message resonates with the ex-communist EU member states, countries that have benefited greatly from EU subsidies and freedom of movement for their own citizens but which now balk at requests to accept even small numbers of refugees. The Visegrad nations maintain it is impossible to integrate Muslims into their societies, often describing them as security threats. So far the Poles, Czechs and Slovaks have only accepted small numbers, primarily Christians from Syria.

Many officials in the West are frustrated with what they see as xenophobia and hypocrisy, given that huge numbers of Poles, Hungarians and other Eastern Europeans have received refuge and economic opportunity in the West for decades.

Indeed there are plenty of signs that the countries are squandering a lot of the good will that they once enjoyed in the West for their sacrifices in throwing off communism and establishing democracies.

Orban’s ambitions for Europe got a big boost with the rise to power last year in Poland of the right-wing Law and Justice party, which is deeply anti-migrant and sees greater regional cooperation as one of its foreign policy priorities. Polish Prime Minister Beata Szydlo’s government says it wants to do more to help Syrian refugees at camps in Turkey and elsewhere while blocking their entry into Europe.

Although Orban is alienating Greek authorities, who are staggering under the sheer numbers of asylum-seekers crossing the sea from Turkey in smugglers’ boars, he insists he must act as a counterweight to Western leaders, whom he accuses of creating the crisis with their welcoming attitude to refugees.

“The very serious phenomenon endangering the security of everyday life which we call migration did not break into Western Europe violently,” he said. “The doors were opened. And what is more, in certain periods, they deliberately invited and even transported these people into Western Europe without control, filtering or security screening.”

Dariusz Kalan, an analyst at the Polish Institute of International Affairs, said he doesn’t believe that the Visegrad group on its own can destroy European unity but says Orban’s vision is winning adherents across the continent in far-right movements and even among mainstream political parties.

“It’s hard to ignore Orban,” Kalan said. “People in Western Europe are starting to adopt the language of Orban. None are equally tough and yet the language is still quite similar.”

Cuban Migrants Flood the SW Border

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2015: At Least 44,000 Cubans Entered US Through Texas and Southern Border This Year, Number on the Rise – Report

The number of Cubans attempting to come to the Unites States via Texas has increased this year, thanks in large part to the thaw in political tensions between the U.S. and Cuba.

 

After President Obama and Cuban leader Raul Castro announced their plans to normalize relations between the two nations, many Cubans feared that the special migrant status they have enjoyed for over 50 years would come to an end. The current “wet foot, dry foot policy” allows anyone who has fled Cuba and entered the U.S. the ability to pursue residency and work in the country.

The Los Angles Times reports that at least 44,000 Cubans have reached the southern U.S. border during the fiscal year which ended in September. This figure is more than twice as many of the 17,466 Cubans who came through the southern border the year before. Full article here.

Tension Simmers as Cubans Breeze Across U.S. Border

LAREDO, Tex. — They are crossing the border here by the hundreds each day, approved to enter the United States in a matter of hours. Part of a fast-rising influx of Cubans, they walk out to a Laredo street and are greeted by volunteers from Cubanos en Libertad, or Cubans in Freedom, who help them arrange travel to their American destination — often Miami — and start applying for work permits and federal benefits like food stamps and Medicaid, available by law to Cubans immediately after their arrival.

The friendly reception given the Cubans, an artifact of hostile relations with the Castro government, is a stark contrast with the treatment of Central American families fleeing violence in their countries. And it is creating tensions in this predominantly Mexican-American city, where residents saw how Central American migrants, who came in an influx in 2014, were detained by the Border Patrol and ordered to appear in immigration courts.

“The people here are starting to feel resentment,” said Representative Henry Cuellar, Democrat of Texas, whose congressional district includes the city. “They are asking, is it fair that the Cubans get to stay and the Central Americans are being deported?”

The disparity will be in sharp relief next week when Pope Francis comes to the border at El Paso to offer prayers for the many migrants who have faced danger or arrest trying to cross the United States border.

Town officials have warned Cubans not to loiter in the streets. Local bus companies complain that Cubans are chartering special vans to travel. Some residents here have also begun to speak up.

A group of veterans from Afghanistan and Iraq held two protests by the border bridge in recent weeks, saying the federal government was spending money on Cubans when it was not meeting the needs of people here.

“We make everyone from Central America wait in line, while the Cubans walk in even though they are not refugees,” said Gabriel Lopez, a Mexican-American Navy veteran who is president of the group of veterans. “We are saying, don’t open the borders to Cubans and give them instant benefits while we have American veterans living on the streets.”

In coming weeks the number of Cubans is expected to spike, as more than 5,000 who have been stalled in Costa Rica since late last year will leave there on regular plane flights agreed to by governments in Central America and Mexico. Already about 12,100 Cubans entered through Laredo and other Texas border stations in the last three months of 2015, according to official figures. Border officials say as many as 48,000 Cubans could cross here this year, more than all those who came in the last two years combined.

Under the Cuban Adjustment Act, a law Congress passed in 1966 in the early years of enmity with Fidel Castro, any Cuban who sets foot on American soil is given permission to enter, known as parole. Cubans are also eligible for federal welfare benefits including financial assistance for nine months under separate policies from the 1980s. After a year, they can apply for permanent residency, a gateway to citizenship.

The recent exodus from Cuba began in mid-2014, even before President Obama in December of that year announced a restoration of diplomatic relations with the government, now led by Mr. Castro’s brother Raúl. In a major change, President Raúl Castro allowed Cubans to leave the country without exit visas. Many Cubans have said that rumors that the special entry to the United States would be canceled had caused them to pack up and go.

“The rumors are unfounded,” Alan Bersin, assistant secretary of Homeland Security, said in an interview, seeking to dispel the fears. “The Cuban Adjustment Act is still in effect and is part of the overall immigration policy and there is no intent presently to change that.”

Mr. Cuellar has called for the act to be repealed, but he acknowledges there is little prospect that Congress will act this year.

The recent influx is nothing like the chaotic rush of Cubans fleeing the Communist government that overwhelmed South Florida with the Mariel boatlift in 1980, and the rafter crisis in 1994. The federal border authorities, who have been watching the number of Cubans growing steadily, added officers and opened extra rooms in the border station, doubling their capacity to process them. Most Cubans move through in less than an hour, officials said.

Frank Longoria, assistant director of field operations for United States Customs and Border Protection, said that despite their numbers, the Cubans’ entry has not affected the huge flows of people and freight trucks each day through Laredo, the country’s largest land port of entry.

At the border, Cubans are fingerprinted and pass through routine criminal and terrorism background checks. There is no special vetting for Cubans, and there are no medical examinations or vaccination requirements.

“Right now I feel like the freest Cuban in the whole world,” said Rodny Nápoles, 39, a coach of the Cuban national women’s water polo team who crossed into Laredo this week.

This week, the first direct flights from northern Costa Rica to the Mexican city just across the border brought more than 300 Cubans, including at least 41 pregnant women and their families.

One of them, Yadelys Rodríguez Martín, 28, who was 19 weeks pregnant, sat down to rest and enjoy a moment of relief on the front steps of Cubanos en Libertad, right after emerging from the border station. After traveling through Ecuador and being stuck for three months in Costa Rica because of a political dispute in the region, she said she was stunned by how quickly she had been admitted into the United States.

“We are not used to things happening so fast,” Ms. Rodríguez said.  More here.

Pay Your Bills Years in Advance, Negative Interest Rate

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Primer: 

The Federal Reserve System‍—‌also known as the Federal Reserve or simply as the Fed‍—‌is the central banking system of the United States. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907. Over time, the roles and responsibilities of the Federal Reserve System have expanded, and its structure has evolved. Events such as the Great Depression in the 1930s were major factors leading to changes in the system.[10]

The U.S. Congress established three key objectives for monetary policy in the Federal Reserve Act: Maximizing employment, stabilizing prices, and moderating long-term interest rates. The first two objectives are sometimes referred to as the Federal Reserve’s dual mandate. Its duties have expanded over the years, and as of 2009 also include supervising and regulating banks, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions. The Fed conducts research into the economy and releases numerous publications, such as the Beige Book.

Negative 0.5% Interest Rate: Why People Are Paying to Save

When you lend somebody money, they usually have to pay you for the privilege.

NYT’s: That has been a bedrock assumption across centuries of financial history. But it is an assumption that is increasingly being tossed aside by some of the world’s central banks and bond markets.

A decade ago, negative interest rates were a theoretical curiosity that economists would discuss almost as a parlor game. Two years ago, it began showing up as an unconventional step that a few small countries considered. Now, it is the stated policy of some of the most powerful global central banks, including the European Central Bank and the Bank of Japan.

On Thursday, Sweden’s central bank lowered its bank lending rate to a negative 0.5 percent from a negative 0.35 percent, and said it could cut further still; European bank stocks were hammered partly because investors feared what negative rates could do to bank profits. The Federal Reserve chairwoman, Janet Yellen, acknowledged in congressional testimony Wednesday and Thursday that the American central bank was taking a look at the strategy, though she emphasized no such move was envisioned.

But as negative rates — in which depositors pay to hold money in bank accounts — become a more common fixture, there are many unknowns about what these policies mean for finance, for the economy and even for the definition of money.

These are some of the key questions, and, where we have them, the answers.

So how do negative interest rates work?

It depends. In the cases of interest rate targets set by central banks like the E.C.B. and Swedish Riksbank, they set a negative target rate for banks, and banks in turn pass it along to their customers. The E.C.B., for example, currently has a negative 0.3 percent rate, meaning that when banks deposit money at the central bank overnight, they pay for the privilege.

Banks have different ways of passing the negative rates on to depositors, often framed as fees for keeping money in an account, which is basically negative interest rates by another name.

Bond markets reflect these negative rates, too, including for longer-term government debt. For example, if you bought a two-year Swiss government bond on Thursday, you would have needed to pay a price that resulted in a yield of negative 1.12 percent. Even 10-year Swiss bonds have a negative rate, a sign markets expect below-zero rates to persist in Switzerland for many years to come.

Generally companies that borrow money are viewed as riskier than governments, so they have to pay higher interest rates. Therefore negative-rate corporate debt is still rare. But it has happened, including with corporate bonds issued by the Swiss food giant Nestle.

But don’t people just withdraw cash rather than pay to deposit it at their bank or buy a government bond that will give them back less than they paid?

You’d think, right? This was exactly why economists had long thought that negative interest rates were impossible. It helps explain why central banks first turned to other tools, including quantitative easing, when they saw a need to ease monetary policy despite interest rates that were already near zero.

But it looks as if the convenience of keeping money in a bank account is worth a small negative interest rate or fees for most consumers and businesses, at least at the only slightly negative rates currently in place. Storing and providing security for cash may be more expensive than a small bank charge.

When initial experiments in Switzerland and Sweden didn’t result in mass withdrawals from the banking system, larger central banks in need of easier money moved gingerly in the same direction. They’ll stop when either their economies start to grow or they see more concrete evidence that negative rates are doing more harm than good.

How is this supposed to help the economy?

Pretty much the same way it always is supposed to help the economy when a central bank cuts rates. Lower rates encourage business investment and consumer spending; increase the value of the stock market and other risky assets; lower the value of a country’s currency, making exporters more competitive; and create expectations of higher future inflation, which can induce people to spend now.

We have decades of experience with central banks trying to manage the economy by, for example, cutting bank rates to 2 percent from 3 percent when there is an economic downturn. The shift to negative rate policies is, hypothetically at least, the same, but with a starting point of rates already around zero.

So does it work?

It’s hard to say with any certainty yet. At a minimum, it seems to have an effect of lowering the value of a currency, which makes export industries very happy. It’s less clear whether it can help create sustained economic growth, particularly when the hard-to-calculate downsides are factored in.

What are those downsides?

The global financial system is built on an assumption of above-zero interest rates. Going below zero could cause damage to the very architecture by which money and credit zoom through the economy, and in turn inhibit growth.

Banks could cease to be viable businesses, eliminating a key way that money is channeled from savers to productive investments. Money market mutual funds, widely used in the United States, could well cease to exist. Insurance companies and pension funds could face their own major strains.

In a speech last year, Hervé Hannoun, then the deputy general manager of the Bank for International Settlements, even argued that this could “over time encourage the use of alternative virtual currencies, undermining the foundations of the financial system as we know it today.”

Is the Federal Reserve going to do this in the United States?

Janet Yellen doesn’t think so. But in two days of congressional testimony this week, she also didn’t rule it out.

For one thing, the United States economy, and particularly its labor market, looks to be in stronger shape than that of many others around the world. So the Fed expects to be in interest-rate raising mode this year (though exactly how fast is very much in question). But even if the economy does take a turn for the worse, there’s no certainty that negative rates are the path the Fed would take.

There is a question of whether that would even be legal. It’s not clear if the language of the Federal Reserve Act allows negative bank rates (J.P. Koning, a financial commentator, runs through the legal issues here). Ms. Yellen said in testimony this week that the legality of negative rates “remains a question that we still would need to investigate more thoroughly.”

She also said that “it isn’t just a question of legal authority.”

“It’s also a question of could the plumbing of the payment system in the United States handle it?” she said. “Is our institutional structure of our money markets compatible with it? We’ve not determined that.”

Financial markets do not now price in meaningful odds of negative rates in the United States. Want one modest clue that negative rates can’t be ruled out, though? In its annual stress test of major banks, the Fed asked the firms to figure out what would happen to their finances in a “severely adverse” scenario that included a sharp rise in unemployment and a rate of negative 0.5 percent rate on short-term Treasury bills — in other words, what you’d expect to see if there were a recession and the Fed cut rates well below zero.

Ms. Yellen noted that the rates on Treasury bills could go negative even in the absence of a policy shift by the Fed, as has happened a few times in the past.

So what are some of the weird things that could happen in a world in which negative rates become routine?

The policies in Europe and Japan are still relatively new and involve rates only slightly below zero. But if the policies become long-lasting, or negative rates go much lower, there are a lot of mind-bending ways it could affect routine transactions.

For example, would people start prepaying years’ worth of cable bills to avoid having money tied up in a money-losing bank account? How about property taxes? Would companies and governments put in place new policies prohibiting people from paying their bills too early?

Or consider this: Many commercial transactions now take place with some short-term credit attached — for example, a company that gets a 60-day grace period to pay bills from its suppliers. Would that flip, and suddenly suppliers would prohibit upfront payment and insist that their customers wait 60 days to pay?

Might new businesses sprout up that allow people to securely store thousands of dollars in bundles of $100 bills, or could people buy physical objects as stores of value that the banks can’t charge a negative interest rate on?

“Negative interest rates in Japan is blowing my mind,” said Jose Canseco, the provocative retired baseball player not normally known for his economic musings, on Twitter. And the truth is, he’s not the only one.