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What Are The Risks Of Low Interest Rates?

Friday, May 3, 2013 - 2:09 PM
From the PBS News Hour:
When the Federal Reserve buys up Treasury bonds to keep interest rates low, is this risky? Paul Solman answers a reader's question on the potential consequences and explains why this Federal Reserve practice -- known as "quantitative easing" -- may not achieve its goal of lowering long-term or short-term rates.

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4
Ken TuminKen Tumin5,441 posts since
Nov 29, 2009
Rep Points: 123,675
1. Friday, May 3, 2013 - 2:37 PM
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Dear KenBDG,

In this post dated "May 3, 2013 - 2:09 PM" you point out an article that states that "quantitative easing -- may not achieve its goal of lowering long-term or short-term rates.".

... May not?  Really? ...

Now that's sort of ironic because within 3 minutes you've made another post dated "May 3, 2013 - 2:12 PM" that is pointing out that "Mortgage Interest Rates Drop Again -- To Record Low Territory".

.... Err ... What gives? ...

Yours Truly,
- Anon
1
ytytytyt64 posts since
Feb 28, 2013
Rep Points: 197
2. Saturday, May 4, 2013 - 10:42 AM
It is not that easy to answer; with the complicated effects due to QEs on short-term interest rate and long-term interest rate. 

I can tell you the end result is not going to be pleasant: inflation, deflation, recession, or depression; you pick it.
1
51hh51hh1,460 posts since
Jan 16, 2010
Rep Points: 6,348
3. Saturday, May 4, 2013 - 10:59 AM
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Dear 51hh,

In the multiple-choice scenarios why don't you include an additional scenario to pick "Soft Landing". After you include that, I'll be happy to take my pick!  :-)

I wish as I was as confident as you are about this resulting into something un-plesasant.  (If I was, I'd consider going short with practically everything I've got, and will put my money, where my mouth is.)

Yours Truly,
- Anon
1
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
4. Saturday, May 4, 2013 - 11:07 AM
Yt,

I will take your optimism over this weekend since I need it:D

I doubt that it will end well with multiple QEs from the trade-off perspectives; something's got to give.

Thanks.
1
51hh51hh1,460 posts since
Jan 16, 2010
Rep Points: 6,348
5. Saturday, May 4, 2013 - 11:22 AM
.

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Dear 51hh,

The "something" that's got to give, I hope will be the "high-unemplyment".  :-)

Yours Truly,
- Anon
1
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
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