Vice Chairman of the Federal Reserve, Janet Yellen suggested keeping interest rates close to zero until as late as 2015, but what are the costs? Our guest, economist Mike Norman, suggests that when the fed buys bonds and engages in quantitate easing (above and beyond just rate targeting), it is simply chaining the composition of private balance sheets. He says that a dollar is effectively the same as a bond, except that the later comes with duration and yield.
By manipulating the yield curve, and pushing interest rates negative in real terms, the federal reserve is distorting the space time continuum, and making it profitable for individuals and businesses to make investment decisions that may not seem so intelligent if the world is still around in the future. Ironically, the suppression of interest rates, if it goes far enough, could make the destruction of the future profitable, and so actualize the very thing that it’s policies reward.