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Seeking Alpha – Derivatives: The Real Reason Bernanke Is Maintaining Low Interest Rates

From Seeking Alpha:

Derivatives: The Real Reason Bernanke Is Maintaining Low Interest Rates

Debt Bubble Chronicles:

Sometimes it’s worth putting things in context.

The world, particularly the US, has been in a bond bull market for roughly 30 years. During that time, bond prices (black line) rose almost continuously, while interest rates (blue line) dropped.

gpc 11-10-1

So here we are, interest rates are the lowest they’ve been in 30 years, and Ben Bernanke wants to make them fall even lower. His public reasoning is he wants to maintain the housing market and spur investment in business.

But does it?

Interest rates have been at 0% for nearly two years. Despite this, as well as a massive home-buyers tax credit, housing prices have at best stabilized a bit…but any claim that low interest rates have stimulated a housing recovery is flat out bogus.

gpc 11-10-3 housing with zirp

As for low interest rates spurring investment in business, this claim is also nonsense. I don’t remember seeing any headlines about companies increasing their capital expenditures or hiring employees? Instead, big business is putting its excess cash to work with buyback programs.

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