Lowest Interest Rates in 5,000 Years and All I Got Was This Lousy Economy
Do you know the last time the world’s interest rates were this low?
About 5,000 years ago.
Let that sink in for a moment.
Since the financial crisis in 2008, world governments have printed $12.3 trillion of money. Central banks have cut interest rates 654 times since the Lehman Brother collapse. There are nearly $10 trillion worth of negative yielding bonds.
And what have we gotten for all of this quantitative easing, interest rate slashing, and central bank monetary manipulation? Economic growth in advanced economies that won’t likely eclipse 2% this year and a global debt problem that has only grown more acute.
Chief investment strategist at Bank of America Merrill Lynch Michael Hartnett put together the statistics. He said it all adds up to the “astonishing history investors are living through today.” He didn’t come right out and say it, but Hartnett identified the real impact of all of this monetary policy – a fake wealth effect:
The cocktail of QE, ZIRP and NIRP has been a potent one for Wall Street and the price of financial assets in the past eight years…And yet the bull market has waned in the past 18 months, there has been no ‘normalization’ of growth, rates and asset allocation, no ‘Great Rotation,’ and bonds and stocks have been trapped in a Twilight Zone of volatile trading.”
Earlier this year, a former Federal Reserve Bank official basically admitted the whole thing was intended to create a “wealth effect.” Peter Schiff called him out on it in a podcast:
[Richard Fisher]was on CNBC yesterday. I can’t believe some of the things he actually said. But he admitted that he and his buddies at the Federal Reserve engineered – and that was his word, ‘engineered’ – a stock market recovery rally. That they front-loaded a bull market. He said this. He said the Federal Reserve did it deliberately to create a wealth effect. Yes, they wanted to create all this phony wealth based on an artificially pumped up stock market. They wanted all this phony wealth to cause us to make stupid, irrational, reckless decisions.”
Eventually, the stock market bubble is going to burst.
The other legacy left us by this crazy monetary policy is spiraling debt. Bond guru Bill Gross at Janus Capital called the $9.9 trillion in negative-yield bonds a “supernova that will explode one day.” Gross said global yields have hit the lowest point in 500 years.
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So, what’s next? What happens when the next recession hits? In fact, Peter Schiff has been saying we are already in a recession.
As Peter put it in a recent Schiff Report video blog, the Fed has checked us into a monetary roach motel. The central bankers will ultimately resort to more of the same – interest rate cuts and yet another round of quantitative easing. As Peter put it on CNBC last week, this time around, we’re not looking at a financial crisis. We’re staring down the barrel of a currency crisis. Ultimately, the central bankers and government policy makers will sacrifice the dollar on the altar of the stock market.
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