04/04/2015 - The Hidden Dangers of Financial Repression
Chris Whalen* explains the dangers of keeping interest rates too low for too long .. zero interest rates & quantitative easing, or QE, are actually making deflation worse .. “These policies are also causing a precipitous decline in consumer demand, which is visible in lower prices for key commodities such as copper, oil and natural gas. And they come at a long-term cost to individual investors and financial institutions .. Zero rate policy as practiced by the Fed and now by the European Central Bank is actually depressing private-sector economic activity by taking money out of the hands of consumers and businesses.And by using bank reserves to acquire government and agency securities via QE, the Fed has been artificially pushing up the prices of financial assets around the world even as income and GDP stagnates. Public companies are using low interest rates to fund stock buy-backs instead of making new investments .. By robbing individual savers and financial institutions of income, and artificially boosting asset prices, the Fed and ECB are unwittingly creating the circumstances for the next financial crisis.” . Whalen advises ending financial repression.
