01-05-2017, 11:11 PM
(01-05-2017, 04:42 PM)kandrathe Wrote: How the Fed is hurting seniors
I don't comprehend the macroeconomic logic of this at all.
Quote:Keeping interest rates low is not only bad for seniors and savers, it is bad for the economy as a whole. In a global marketplace, low interest rates in the United States discourage lending to the United States. The reason the Fed had to step in to buy Treasury paper is that there is lower demand because of ultra-low interest rates.
That is clearly, obviously wrong. Low interest rates and low bond yields are the *result* of investors lending to the United States. There was *tremendously high* demand for treasury paper. Bond yields remained at historic lows (AKA bond prices remained at historic highs) from 2008 right up until very recently. Investors held great mountains of US government bonds, as safe assets during an ongoing flight to safety. That didn't change at all until Trump was elected, presumably on the belief that he will increase spending and lower taxation.
-Jester