With inflation running at 2%+ over the past 5+ years Obama through Bernanke has stolen over 10% of people's savings. Inflation is a tax. FF's rate should be 2% OVER the inflation rate. So Bernanke has stolen over 10% of saver's money already heading toward 15%-20%. The guy is a thief and a poster child for why the illegal FED should be abolished.
I don't know how the guy can keep a straight face when he testifies?? He says there is no inflation but said the same thing when houses were going up 30%/yr yet says we have deflation when they correct in price?? Funny that home builders are complaining about the high labor and input costs this week on their reports. That is the definition of inflation which obviously is picking up steam. Bernanke will go down as one of the worst ever. He will be tops though as one of the best lairs ever.
Actually, an economic fair rate of return is 2-4% over the inflation rate for a long term, low risk asset. I would say a 30 year bond is in that range ... though getting risky. That 2-4% has overshoots ... higher in the 1980 and lower now.
Bernanke printings can all be soaked up by eventually selling the securities back to the private sector or letting them retire (resulting in the same thing). Bernanke's actions can be reversed ... Bernanke isn't the problem ... actually, probably saved the system after the initial stop gap measures. The Fed's printing of money to finance the deficit (demanded by law to finance the Treasury) can not be reversed without off setting budget surpluses which will never happen ... heck we got excited when the budget was balanced with a comparative small surplus during the boom times of the late 1990s ... how are trillions ever going to be paid back? ... ain't going to happen.
Savers were just in the wrong investments ... they should have been in anything else than money markets, cd's etc ... heck, everyone was saying for how long interest rates would be low. They should have looked else where and made some money. It's not Bernanke's fault.
The FF rate should be 2% over the inflation rate or ~4% today. The 30 year is very risky unless you want to hold for the full 30 years? Who would buy a 3 1/2% coupon in 5 years when rates could be 7% and hold for another 25 years?? NOBODY unless a big drop in price to get the yield up to 7%.
Second it would be unfair & not sound for a 80-90 year olds to have all their money in stocks? No financial adviser would ever suggest that.
Third it was OK for Bernanke to be the buyer of last resort when the #$%$ hit the fan but that should have lasted 6 months tops. Thee was no reason to bring rates to 0% and leave them there another 4 years?? We could easily have a 2 1/2%-3% FF rate today without harm to the economy. That would still get us 5 1/4% mortgages which is historically cheap. There should be some cost to money & we need price discovery to get real equity values not propped up ones. Subsidized rates have big consequences down the road. I can hear it now. I want a bailout because I bought my house at 3% mortgage and now can't sell at 7%??LMAO
Lastly the FED just cannot let the securities run off?? Treasury would then have to return the cash back to the FED when they get redeemed just like any investor. If not America goes into default. Nobody would touch a US security. So where does treasury get 3T? Taxes are the only place. The FED is in a box.
My point is contrarian but rates too low create more problems than they solve. Savers will spend the interest so that is natural stimulus. Companies will stop borrowing for nothing to buy back stock and invest in their business for growth. That means hire workers and expand. Stock market will get over the free money ending and bid up stocks once they see the organic growth that happens. It will also get government to get off their butts and pass pro growth legislation and answer for those policies that do not work. In other words a more healthy economy. Enough already being at depression levels when there isn't one
Hmmm?? Cyprus wants a 10% tax stealing that sum from bank deposits to pay for debt they can't pay. Bernanke has already stolen over 10% from bank deposits because America can't pay its bills. Same thing. Only difference is Cyprus is being more obvious.
He is good at creating bubbles with his constant printing of funny money. Consumer Staples at 20 times for 1-2 percent growth??LMAO Stocks will go up as Bernanke prints because that cash has to go somewhere. He is also buying 80% of all our debt nobody else wants. How long can that go on?? So the people are being herded into stocks with 0% rates as PE's soar. This will end badly like it always does. Some poor slob as president will have to pull the plug then the whole house of cards comes crashing down.
Bottom line this economy is horrible. Earnings are being manufactured. The FED is trying to cover for an inept Obama administration. No employer wants exposure to ObamaCare & massive new regulations so they sit on their hands. Job splitting the new tactic to avoid the new taxes. It's a mess. This is why AA and all materials are in the dumps. Central Bankers led by Bernanke and socialist politicians have ruined the global economy,. Money printing will postpone the inevitable but eventually the &(%% will hit the fan. Enjoy the phony rally while it lasts.