It would seem that, in a matter of months, the world has become a pretty scary place. Nowhere is that better reflected than in the historic drop in interest rates around the world.
In the U.K., which votes next week on whether or not to break away from the European Union, 10-year Gilt rates (British bonds are called "Gilts" because they used to be printed on gold-edged paper), are yielding a record low 1.13 percent.
Japanese 10-year government bonds have fallen more deeply into the red, with a yield of minus 0.17 percent, while 10-year German bunds now sport negative yields for the first time ever!
U.S. bond yields are approaching the lowest level since 2012, at just under 1.6 percent.
For all intents and purposes, this not only reflects growing anxiety about economic and political risk, but also most certainly ties the Fed's hands, possibly for much of the rest of the year.
If the Fed were to raise interest rates at this week's meeting, or even in July, the resulting strains might be too much for global markets to bear.
Such a decision would likely put further upward pressure on the dollar, downward pressure on emerging market currencies, and also on the Chinese yuan, which is currently at its lowest level since January. (Without much fanfare, I might add.)
In addition, it would harm the price competitiveness of U.S. exports, cut into multi-national corporate profits, which are already in recession, and add further deflationary pressures to the domestic, and global, economy.
Hence, the global interest-rate market is boxing in the Fed, not the domestic economy, though it, too, has recently given the Fed reason to pause … again.
So what do negative interest rates really mean?
They simply mean that global investors are so nervous that they are willing to pay governments to lend them money.
In Germany, investors are willing to pay their government a half point to hold their money for two full years. Unheard of in modern times.
And while real interest rates (the nominal interest rate minus the rate of inflation) have fallen into negative territory in the past, this is our first experience with negative nominal interest rates.
This is serious stuff. It's not just a matter of central banks manipulating interest rates downward. Investors are actually leading the central banks in driving down yields.
In the U.S., where the economy is relatively stronger than the rest of the world, rates are falling, as well; signaling to the Fed that fear of slow growth, deflation and other risks, far outweigh the fear of inflation and faster growth here at home. Indeed, inflation expectations in the U.S. continue to decline, again, potentially tying the Fed's hands, not just this month, but maybe for months, or even years, to come.
That is a global message, too. In the absence of alternative forms of economic stimulus, whether through fiscal or tax policy changes, this is the world that the Fed must deal with.
David Hackett Fischer, a renowned history professor at Brandeis University, wrote a compelling book in 2000 entitled "The Great Wave." In it, he describes how inflationary and deflationary spirals are global phenomena that often take decades to ebb and flow.
The sub-title of the book, "Price Revolutions and the Rhythm of History" tells us we may be in the midst of a price revolution today, one that is unlikely to end anytime soon.
It may be best to get used to negative rates abroad, and maybe even at home. The Fed may need to get used to it, too.