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Bernanke's Worst Nightmare: Rising Real Interest Rates

Wednesday, May 29, 2013 - 6:51 AM
From Minyanville:
Though he wouldn’t admit it, Bernanke met his match in 2011. The consumer balked at attempts to stimulate aggregate demand via inflationary policy of negative real interest rates, and ever since, has been raising real interest rates by reducing inflation through lower aggregate demand.  This is perhaps the most unappreciated yet significant market development since the financial crisis.

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8
Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
Rep Points: 125,077
1. Wednesday, May 29, 2013 - 7:46 AM
"What seems to be lost in the monetary debate is that this persistent drop in inflation defies the primary purpose of quantitative easing, which is designed to lower real interest rates. In fact, with nominal yields rising in the face of falling inflation and thus raising real interest rates, the US economy is now closer to a deflationary death spiral than at any time during the Fed’s unprecedented policy designed to prevent just such an outcome."

Wow, that's pretty dismal.
9
ShorebreakShorebreak2,622 posts since
Apr 6, 2010
Rep Points: 14,215
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