The negative impact of current policy is clear. The near-zero interest rate experiment is weighing on consumer and investor confidence, and the Fed signals its lack of confidence with each “extended period” proclamation. It is providing banks with low-interest financing that can be used to create modest returns through a carry-trade in U.S. Treasurys but is adding nothing to the velocity of money, which is what actually generates economic growth.
The Fed’s super-loose policy has driven down the security and spending power of savers, particularly those in retirement who played by the rules during their working years and now depend on the earnings from their savings for a decent quality of life. As a result, savers and investors are being forced to take more risk with their money as they hunt for higher yields.
Thank you Charles.
It’s long past the time when we should have been hearing these things from people in the investing business – and in industry.
Simply put, capital formation is destroyed by these sorts of games, and yet it is capital formation that actually drives business creation and thus employment.
BenDover has intentionally and willfully deployed policy intended to gangrape those on fixed incomes along with those who would otherwise create businesses and jobs. Our Congress not only sat still for this The Senate reconfirmed him after having more than a year of this nonsense be promulgated to the market and economy.
As Mr. Schwab points out, no bank in their right mind would offer 30 year fixed-rate loans into such an environment. Thus, this has also forced all mortgage lending through two bankrupt companies on the Government teat – Fannie and Freddie – where the risk of loss bears no relationship to price, as it does in the private sector.
And in the meantime, we are running deficits as a direct and proximate cause of this policy – deficits that the government could not continue to fund were it not for these distortions.
It is long past the time to stop, and if Bernanke will not stop, he must be removed.