Long Term Interest Rates
I have written many times about how interest rates will have to stay ultra low (suppressed or otherwise) for a really long time. The reasons are many but the biggest that jumps out is housing and a reliance on free credit for a weak economy. Looking out I do not think it nuts to say that rates could be less than 1% (as set by the FED) for 10 years or more. How is that for an "extended period"?
Karl Denninger gets a little excited along these lines in a post today and I would suggest you check out the math he does. If rates on US debt go to 5% things get ugly in a hurry:
Avoidance Will Not Work
We are proceeding towards even more QE and maybe other stupid pet tricks as yet unknown, as hinted at today by FED member Dennis Lockhart (via Calculated Risk):
I cannot tell you how the economic policy story will play out. I can assure you, however, that the Fed has scope for further action to influence the course of recovery. And, importantly, I believe the Fed and the committee have the will to act—or not—as demanded by economic conditions in the near term.
I would again ask at what point will a clear plan that takes into consideration the LONG TERM ever be articulated by the FED? It strikes me as very weird that an entire financial system is rested upon a US Treasury and a FED that have been less than forthcoming about many things. It is my future (yours too!) on the line, how come I don't get an explanation?
Have a good night.