“By forcing asset prices higher (stocks), The Fed hopes to prevent the wholesale meltdown of the pension system. better to pay off in devalued dollars than not at all.”
I agree. The extremely low interest rates on treasuries has propelled an asset bubble. The bubble is not just in stocks. Bond prices have soared although they have retracted a little in the last month or so.
Individuals living on retirement savings are in a difficult place. Rates on traditional safe investments are insulting. The asset bubble is frightening.
It certainly has me concerned. With all the sharpies pushing gold, I can see no real safety there. In fact, I do not trust any of the “money” guys at the moment. I am sorely tempted to invest in real estate if the prices are about 1.5 times their 1995 level, i.e., a 3% p.a. increase since the last real estate asset bubble.
Exactly. So we are in effect transferring wealth from the retirees by paying them a pittance on their savings and further devaluing their assets thru inflation to the speculators who borrow at extremely low Fed fund rates and invest in stocks and bonds.
And who is structured to leverage up and buy stocks on margin? The money center financial institutions of course.
Bernanke is a mad man, he continues to lead us on a path to ruin. They are soooo fearful of deflation that they act irrationally. My favorite quote from Von Mises:
There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.
An independent banker with no accountability to anyone really (especially so since Bam is no where to be found) is making decisions for us all. It is total insanity.
schu
Fed pumping helps to artificially reduces interest rates in the short run, but that depresses rates which existing savers get on their small savings accounts. Those would be: retirees and elderly people with savings in banks. Fed money expansion is a wealth transfer - not a policy that “helps Society overall.” It is an inflation tax in the long run, and an act of theft from current savers in the immediate run.
BUTT OUT, GOVT