According to a resident scholar at the American Enterprise Institute, John Makin, "investors are lining up to lend to some governments at very low interest rates."
Which governments?
The United States, Japan, and European nations.
Why?
Makin notes that three factors have kept and will likely continue keep interests rates low into the near future:
- Fears of inflation are minimal internationally.
- There is little growth in the world's most stable economies.
- The gradual erosion of investor confidence in a largely uncertain international market.
In this environment, investors are clamoring to buy government bonds and notes which, in turn, drives down interest rates.
What does that mean to the average Joe Schlub like The Motley Monk?
It's time to play "Follow the leader"...
- Interested in purchasing a home? It's an ideal time to lock in a low-interest, fixed-rate mortgage.
- Thinking about opening a start-up business? It's an ideal time to take out a low-interest loan.
- Invest in "small cap" mutual funds. It's small businesses that fuel the economy and with low interest rates, small caps have been performing quite nicely during the past year.
Let the discussion begin...
To read John Makin's article, click on the following link:
http://www.realclearmarkets.com/articles/2012/01/25/why_are_interest_rates_presently_so_low__99481.htm
The FED has created a great time to be in debt esp. long term debt. Creditors will be screwed in the next decade which is why I loaded up on my last refi and have no interest in pre-paying anything the way i did back in the 90s.
ReplyDeleteFrom society's viewpoint, this is not necessarily good, but that is the environment your policy makers have created.
Hmmm. Too bad the current POTUS is really wrecking the economy according to the wingnuts. Oh, wait. What...?
ReplyDeleteThe liberal Pilgrim
Low interest rates mean the economy is screwed...
ReplyDeleteSure, it is a GREAT time to buy a house:
IF you have a job and think the job will be there next year IF you don't have to put kids thru school
IF you don't have to commute to work paying $4 gas and increased public transportation costs
IF you don't worry about skyrocketing property, water, utilities and income taxes
If you can sell the house you own
If you can pay cash or qualify for an FHA or VA loan.
Start up a business. BRILLIANT!
LOTS of vacant retail space (I wonder what happened to all those great small businesses?)
THEN, once you borrow the money at a low interest rate, hope you get it paid back before the balloon payment from the bank. Not many banks giving out 30yr fixed rate working capital loans. Banks are famous for giving out free umbrellas when the sun is shining and them demanding their return when it starts to rain!
THEN, hope that the people with jobs, near your business, buy your products instead of going to Target, Wal-Mart, Costco or Sam's Club because Americans do what's best their wallets not what's best for their neighbor or country
Invest in small cap funds because they have performed nicely over the past year. SURE...
The large cap funds, tax exempt funds, international funds ALL performed nicely for periods of time.
Remember, the bums are still running Wall Street, the thieves are still running K Street and the only ones that get screwed are those of us on Main Street.
I don't know if the market, gold, real estate or the flavor of the month investment is the right thing to do but I do know that when the Fed says interest rates remaining low is a good thing, they are quoting from the same book that said something about putting lipstick on a pig...
-American Airlines will eliminate 15,000 jobs as part of its bankruptcy reorganization and pensions may be wiped out in the process.
ReplyDelete-Archer Daniels Midland is eliminating 1,000 jobs
-Kraft will reduce its workforce by up to 1,700 people
-The Northern Trust is eliminating 700 jobs
-TelLabs is eliminating 530 jobs.
Interest rates are low, companies are buying back stock, bankruptcy laws allow all sorts of trickery to and the politicians still have their jobs, benefits and perks.
Our 'leaders' play the blame game. It's the fault of the 1%. It's the fault of Wall Street. It's the fault of Big Business, Big Banks and Big Oil.
Never mind who passes the laws. Never mind that noble Americans like Bill Gates and Warren Buffet have companies sheltering billions of dollars off-shore to avoid corporate tax. Yet, these geniuses have no problem telling Americans to pay more income tax.
The economy is recovering yea sure...,
Interest rates are low - big deal!
Let's keep putting lipstick on that pig!