The Dodd-Frank and Obamacare laws clock in at nearly 5,000 pages between them. But it takes just one word to throw enough uncertainty into the economy and stave off growth: "zero."
Going on four years now, the Federal Reserve has been doing something it's never done before: It has kept a key interest rate, the Fed funds rate, as close to zero as possible.
This "zero percent interest rate policy," or "Zirp" to insiders, is supposed to help heal the economy.
How? Simple. With federal interest rates low, banks and other financial firms can borrow cheaply. Banks can use that money to make investments and thus push up asset prices, including stock prices.
Similarly, with federal interest rates low, mortgage rates stay low, too, allowing people to buy houses.
With stock and home prices rising -- or, at least, in the case of home prices, falling less than they otherwise would -- companies and people are supposed to feel wealthier and spend money. Their optimism thus creates jobs.
The problem is, though, that Zirp is not a cure. It is an anesthetic. Zirp doesn't fix the economy; it puts it in a state of suspended animation.
Why? Smart people know that Zirp cannot last forever. Eventually, the Fed must raise interest rates, as rates that are too low for too long run the risk of inflation. In fact, Fed officials have said they could raise rates by the middle of next year.
What happens then?
Zirp has prevented people -- whether they've got billions of dollars or are hundreds of thousands of dollars in debt -- from taking a full accounting of their losses and moving on.
What's a house in Las Vegas worth? What's an investment in a complex 2007-era mortgage-backed security worth?
The distortion that cheap money adds to the economy prevents us from finding out.
What happens, for example, if mortgage rates rise from today's 3.98 percent to, say, 4.98 percent? For a family borrowing $250,000 to buy a house, that would mean an extra $1,788 in payments every year, or about $28,900 over the course of a 30-year mortgage, taking into account today's value of future money. That means anyone taking advantage of today's super-low rates runs an unusually high risk of being underwater in a few years, when potential buyers of their house will be struggling with higher rates. This anxiety helps explain why so many people are watching from the sidelines.
Or what happens when banks and other financial firms can't borrow so cheaply? Banks borrow short-term to make long-term investments. If banks can't do so nearly for free, they may have to dump their long-term investments, depressing stock and bond values once again and creating ripple effects through the economy.
The fact that they're waiting for Zirp to end helps explain why non-financial companies have more than tripled the amount of money they keep in plain old checking and savings accounts since the end of 2008.
Back then, they held $420.5 billion in such safe stashes; now, it's $1.27 trillion.
The smart money knows that the financial crisis is not over; it's on hold. When it comes back, they'll be ready -- with cash.
In the meantime, people trying to build up their own savings have a hard time. Zirp means that you, too, get zero interest when you put your money in the bank. The Fed figures that if people are dissuaded from saving, they'll spend. Instead, people may thwart the Fed by saving more out of fear.
The economy has plenty of free money -- and plenty of companies and people too terrified to spend or invest it.
Nicole Gelinas is a contributing editor to the Manhattan Institute's City Journal. She can be reached at firstname.lastname@example.org