<b>IN’s Cooper:</b> Interest rates do the limbo rock

Those of us who remember Chubby Checker in his prime (if you're wondering, he's still alive and will be twisting at the Topsfield Fair in Topsfield, Mass., and the Georgia National Fair in Perry, Ga., in October) probably can recall one of his lesser hits, “Limbo Rock.”

Those of us who remember Chubby Checker in his prime (if you’re wondering, he’s still alive and will be twisting at the Topsfield Fair in Topsfield, Mass., and the Georgia National Fair in Perry, Ga., in October) probably can recall one of his lesser hits, “Limbo Rock.”
The lyrics — about winning the girl by dancing under a limbo bar, sung in a faux-Jamaican accent — certainly don’t rank up there with the poetry of Oscar Hammerstein. But the song’s concluding line, “How low can you go?” delivered sassily by Chubby, strikes me as a pitch-perfect question to ask in the current interest rate environment.
For months, everyone has been saying that interest rates have reached a bottom. But still they fall.
Hard as it is to believe, given our nation’s less-than-stellar balance sheet, but Treasury securities continue to be the world’s hottest financial ticket. And since that’s the case, it seems that interest rates, like the limbo bar, are destined to go lower still.
How low can they go?
Mortgages are at levels that Ozzie and Harriet would consider a steal. Savers are lucky to earn 1% on their savings accounts. Mutual fund companies are subsidizing money market funds, which are running on fumes, and corporations — sitting on mountains of cash already — are planning to borrow even more because money is so cheap.
I’m no economist, so don’t ask me when or how this bizarre-o world will change. And don’t ask the economists either, since they don’t know and they tend to make accurate predictions only in hindsight.
Eventually, of course, interest rates will rise. Eventually. But what about the meantime?
The only scientific proof I have that interest rates can go lower still comes from one dusty bit of calculus I remember from college. Don’t ask me to do a differential equation, but that snippet about finding a limit as X approaches zero somehow stuck with me.
As I recall the real-world explanation, it’s like someone trying to reach the wall at the other side of a room. If the person goes halfway across the room in his first step, then halfway between where he is and the wall on the second step, and keeps taking smaller and smaller steps, he gets ever closer to the wall with each step, but never actually quite gets there (talk about frustration).
Interest rates can theoretically follow that same path of nearing zero without ever getting there.
I can see the headlines in November: “Treasury yields down to 0.542%.”
Then the headline in January: “Treasury yields down to 0.437%.”
Then March: “Treasuries down to 0.386%.”
As Chubby Checker would ask, “How low can they go?”
The answer, I’m guessing, is pretty low.