“People said it was the end of the world when short-term rates went to zero. Now it’s the end of the world that short-term rates are barely above zero.”
In Germany and Japan the rates have actually dipped below zero.
But what I haven’t been able to understand is given this flood of cheap money, why is inflation still low and why are investors still willing to buy bonds that are yielding next to nothing?
What’s your explanation?
“What’s your explanation?”
I can’t explain it and have never worried about explaining it over the last 50 years. I adjust my investments and I used to adjust my business (I’m just an investor now) as needed and keep moving toward my goals.
It’s worked out just fine. The collapse story has been stopping people from moving forward all my life. They can explain to you all day long. But they have nothing to show for it. Luckily, I ignored the story and just went about my business.
Prices are over inflated already and to prevent a depression the feds are “priming the pump” as Milton Friedman would say. We are long overdue for a reevaluation and nobody wants it on their watch.
More secret quantitative easing perhaps? Massive bubbles in the education and technology sectors? Wages are stagnant and in some places can’t keep up with property taxes and inflation.
But alas, that is the problem with government manipulation of the money supply. It changes incentives unnaturally causing people to make different economic choices than they would had it been earned the old fashioned way. And eventually there will be a correction