NAN

I read a news story today (link) where some economists (or rather, analysts who focus on economists, which is a little like saying “con men who study charlatans”) speculate on the possibility of a zero percent prime rate from the Fed.

Aside from the obvious economic turmoil this would generate, if this were to happen, one hidden cost will be the computer downtime as software on Wall Street (and many other places) is patched to fix all the points where division by zero is tickled.

You read it here first.

Author: landon

My mom thinks I'm in high tech.

13 thoughts on “NAN”

  1. @Reuben: You’re probably right. Then again, software is a tricky business, and who knows when someone would take (say) a reciprocal of an interest rate to do some kind of analysis.

    @Jack: I don’t have a sense for how well financial apps are written. Spreadsheets, probably not so well reviewed. I don’t know about analysis programs, or “that Smalltalk thing the consultant whupped up five years ago.”

    The primary worry is: Large body of code out there, and an interesting boundary condition that *I’ll bet* hasn’t been tested everywhere. Mitigate that with “why would you ever divide by an interest rate?” and there probably won’t be a problem.

    Just don’t be surprised to see the DOW go to NAN or zero or -INF or something because of IEEE arithmetic poisoning…

  2. It will serve the totalitarians *cough* I mean economists right if everything does crash. It still won’t stop the Federal Reserve from debasing/inflating/creating our currency and proportionately destroying the last shreds of economic stability we have left. lim x—>0 (1/x) = INF….GO ZERO!!!!!

  3. We’ve had a similar (but not as extreme) issue here in the UK. They reduced VAT (sales tax, I guess) from 17.5% to 15% as a stimulus measure, with one week’s notice. Cue massive expenditure on overtime and consultants as systems that have been running at 17.5% for nearly 20 years suddenly need to run at 15%.

    Obviously a sales tax change is foreseeable and the rate shouldn’t have been hardcoded anywhere, but it was – and even worse VAT isn’t supposed to go down, only up.

    The other issue this highlighted is basic maths failure at all levels because this is actually a price drop of 2.13% (1.175/1.15) and not 2.5%, so a lot of people bodged it but bodged it.. poorly.

  4. @landon – what are the odds on the “smartest guys in the room” bankrupting most of western civilization AND messing up their IT systems so it can’t cope with 0% interest rates. You’d have to be nuts to think that…oh, wait…

  5. Related story – my company (in Canada) had a bug in their financial software related to exchange rates. Apparently the designers of the software had always assumed that the exchange rate between the Canadian dollar and the US dollar would be less than one. However, there was a period last year when the CAD became more valuable than the USD for the first time in several decades. The software couldn’t handle this, resulting in various negative numbers and infinities in the output. They had to scramble to issue a patch.

  6. for the interest (+1 point for pun) of accuracy i’d like to say that the first SFish place where i read a piece on negative interest rates was futurefeedforward (.com,.net or something)

    im just not sure that lenders of last resort would be happy to accept it..

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