Four Reasons to Root for Higher Interest Rates

But there's an upside to higher rates, says John Lekas, senior portfolio manager of the Leader Short-Term Bond Fund, which has about $320 million of assets under management:

• --Boost the Buck: "If we didn't have [problems in] Europe the dollar would probably be headed a lot lower here and cause things like inflation," Lekas says. Higher short-term rates will help increase the dollar's appeal, especially relative to currencies in nations where key lending rates aren't stuck at zero.
• --Reward Savings: "Unfortunately a lot of your viewers were forced into the capital markets because they can't earn any money in a money market," Lekas says in the accompanying clip. "A lot of those people should not be in the capital markets. We think it's a very dangerous place to be." Raising short-term rates will encourage people to save money, which is something our debt-laden society desperately needs.
• --Curb Speculation: With rates at zero, investors are being encouraged to speculate with borrowed dollars via the so-called carry trade. "When Alan Greenspan lowered interest rates to 1% [and] flooded the system with money, we got the housing bubble," Lekas recalls. "What bubble will we get this time? I don't think there's a free lunch."
• --Spur Lending: Because they can borrow from the Fed for practically nothing and invest the money in "risk-free" Treasuries yielding over 3%, banks have no incentive to lend right now. "It sounds counterintuitive," Lekas admits, but higher short-term rates will reduce that spread and prod banks to lend capital rather than sit on it, which the economy needs to sustain a recovery.

 Lekas' fund is positioned benefit from higher rates, so he readily admits this is a bit self-serving, but that doesn't mean it won't be good for the rest of us, too.