My headline says ‘time to move interest rates higher’–but honestly it is way past time to move them higher. Going way back to 2012 or so the Fed refused to cut back QE (quantitative easing)–honestly they have screwed up in this respect for 8 years now. Because there was a ‘taper tantrum’ once is no reason to keep doing the wrong thing.
The Federal Reserve, by proclaiming interest rates are going to remain low for years, is simply prolonging some pain, which can be alleviated, to a small degree, right now.
If the economy is so bad that we need to have the 10 year treasury at .77% why do stock prices keep going up and up?
The Fed needs to get out of the way–start cutting back asset purchases (in the last 2 months they have bought $130 billion in assets) NOW. We need the 10 year treasury to move to at least 1.50% in the next 6 months.
Through the asinine actions of the Fed insurance companies and pension funds throughout the country are all going to be on the verge of bankruptcy within a couple years. They will be the next bailouts–it’s coming, just a matter of time.
From my reading virtually all pensions systems use a totally unachievable rate of return to calculate their pension contributions and payouts–usually 6-7%–not going to happen when low risk assets such as corporate and muni bonds are paying 1-3% and over time, just like individual income investors, their achievable returns are going to fall dramatically.
Like pension systems, insurance companies, depend on safe income assets to fund their business–they live on the ‘float’–and the float isn’t paying much, if anything, right now.
It’s time for the Fed to quit kissing ass on Wall Street and do what they have to do for the good of the country.