Federal Reserve Interest Rates Should Be Near Zero Forever

[Kimura]

Free money forever.

What could possibly go wrong with that?

What is $$$$? I'm not being a douche. You've been in the business longer than I have. Money is not a commodity. We've both done well due to this very reality.

I get why the funds rate is at zero now. I don't know if it will work long term. Maybe, maybe not. I don't know.

But if capital is continuously mispriced, then distortions arise in the economy. When capital is mispriced, poor capital allocation decisions are made. Pinning the front end at 0% until the end of time will continue this bubble/bust cycle for as long. The perverse effect will be, at least to some extent, more and more resources devoted to financial speculation, at least until the system comes crashing down and we replace the dollar with something else.

This is typical business cycle theory which I disagree with on multiple levels. I'd
be happy to start a separate thread on this discussion if you're game. I reject the business cycle as a Minskyite.

Secondly, if the dollar is replaced as a reserve currency, the impact will have a negligible effect on our lives.Literally.

 

[Toro]

What is $$$$? I'm not being a douche. You've been in the business longer than I have. Money is not a commodity. We've both done well due to this very reality.

I get why the funds rate is at zero now. I don't know if it will work long term. Maybe, maybe not. I don't know.

But if capital is continuously mispriced, then distortions arise in the economy. When capital is mispriced, poor capital allocation decisions are made. Pinning the front end at 0% until the end of time will continue this bubble/bust cycle for as long. The perverse effect will be, at least to some extent, more and more resources devoted to financial speculation, at least until the system comes crashing down and we replace the dollar with something else.

This is typical business cycle theory which I disagree with on multiple levels. I'd
be happy to start a separate thread on this discussion if you're game. I reject the business cycle as a Minskyite.

Secondly, if the dollar is replaced as a reserve currency, the impact will have a negligible effect on our lives.Literally.

Capital is not immune from the laws of supply and demand. If priced improperly, it will create distortions and dislocations. We've had two massive bubbles over the past 15 years because of this.

And when I mean "replace the dollar," I mean we, the United States, use another American currency, the dollar 2.0 or whatever. Most currencies that existed 150 years ago aren't in existence today. Currencies exist only because the people have confidence in it. If Americans lose confidence in the dollar, it would cease being a functional currency. Pinning the funds rate at zero forever would increase the odds of an internal dollar collapse immensely.

 

[oldfart]

That's a way, way, way different argument than we should have free money until the sun turns into a Supernova.

I'm a bit confused s to your position. How long do you think a policy of zero or negative real interest rates should last? Or do you think such a policy is a bad idea period?

If you accept the Hansen/Summers conjecture of secular stagnation, the situation would endure for decades if not indefinitely (Hansen tied it to demographic trends). If the Wicksellian "natural" rate of interest is negative, how long does it take to change?

 

[oldfart]

I get why the funds rate is at zero now. I don't know if it will work long term. Maybe, maybe not. I don't know.

But if capital is continuously mispriced, then distortions arise in the economy. When capital is mispriced, poor capital allocation decisions are made. Pinning the front end at 0% until the end of time will continue this bubble/bust cycle for as long. The perverse effect will be, at least to some extent, more and more resources devoted to financial speculation, at least until the system comes crashing down and we replace the dollar with something else.

This is typical business cycle theory which I disagree with on multiple levels. I'd
be happy to start a separate thread on this discussion if you're game. I reject the business cycle as a Minskyite.

Secondly, if the dollar is replaced as a reserve currency, the impact will have a negligible effect on our lives.Literally.

Capital is not immune from the laws of supply and demand. If priced improperly, it will create distortions and dislocations. We've had two massive bubbles over the past 15 years because of this.

And when I mean "replace the dollar," I mean we, the United States, use another American currency, the dollar 2.0 or whatever. Most currencies that existed 150 years ago aren't in existence today. Currencies exist only because the people have confidence in it. If Americans lose confidence in the dollar, it would cease being a functional currency. Pinning the funds rate at zero forever would increase the odds of an internal dollar collapse immensely.

I've heard this argument a lot and frankly it makes no sense (literally) to me. Why are low rates of interest more likely than high rates to produce inefficiency and misallocation? When interest rates were 22%, did we have a superior allocation of capital?

I get that easy LENDING promotes bubbles and possible misallocation of capital, but with small businesses starved for capital while banks sit on trillions of excess reserves, I don't see a connection. We have a simultaneous capital shortage in our most productive sector and a capital glut in the financial sector; probably the biggest misallocation of capital in modern history.

 

[Toro]

This is typical business cycle theory which I disagree with on multiple levels. I'd
be happy to start a separate thread on this discussion if you're game. I reject the business cycle as a Minskyite.

Secondly, if the dollar is replaced as a reserve currency, the impact will have a negligible effect on our lives.Literally.

Capital is not immune from the laws of supply and demand. If priced improperly, it will create distortions and dislocations. We've had two massive bubbles over the past 15 years because of this.

And when I mean "replace the dollar," I mean we, the United States, use another American currency, the dollar 2.0 or whatever. Most currencies that existed 150 years ago aren't in existence today. Currencies exist only because the people have confidence in it. If Americans lose confidence in the dollar, it would cease being a functional currency. Pinning the funds rate at zero forever would increase the odds of an internal dollar collapse immensely.

I've heard this argument a lot and frankly it makes no sense (literally) to me. Why are low rates of interest more likely than high rates to produce inefficiency and misallocation? When interest rates were 22%, did we have a superior allocation of capital?

I get that easy LENDING promotes bubbles and possible misallocation of capital, but with small businesses starved for capital while banks sit on trillions of excess reserves, I don't see a connection. We have a simultaneous capital shortage in our most productive sector and a capital glut in the financial sector; probably the biggest misallocation of capital in modern history.

There's a difference between cyclical and secular. Excess reserves today are a cyclical issue. Pegging interest rates at 0% until the end of time - as the OP argues - is a secular issue.

I think that the Fed is creating and contributing to serial asset bubbles with its policies over the past 15 or maybe 25 years, beginning perhaps with the 1987 bailout of the market crash but certainly with the bailout of the market after the LTCM debacle. It is my belief that the Fed's current policy will end badly. However, I may be dead wrong. History may prove that the Bernank is totally right. Stocks going up and gold going down may be the market telling us that everything will be fine. I have to respect the market, and I have enough experience in capital markets to know that I am very fallible.

As for the 22% interest rates, I think Alfred Marshall's theory of capital formation is correct. Over time, the rate of return on the capital stock of the company should equal the long term growth rate of the economy. Marshall argued that over time, the capital stock should grow at the same rate of the economy, and the cost of capital was the opportunity cost of investing within the economy. Thus, the real weighted average cost of capital should equal the rate of return of the economy over time.

That makes sense. If the real long-term growth of the economy is 2%, if real returns are greater than 2%, eventually, the growth in the capital stock will subsume the entire economy, which is mathematically impossible. At some point, if the growth of the capital stock exceeds the growth in the economy, there will be excess productive capacity, which will lower returns on capital and eventually destroy the least marginally profitable plant. That's what happened during the Tech Bubble, and what happened during the Housing Bubble.

However, that may not hold over the short-term as cyclical fluctuations vary with variations in supply and demand, particularly when non-market agents, i.e. the Fed, influence the rate of interest. Inflation distorts capital allocation and channels capital into non-productive activities. When inflation is high, the non-market agent, i.e. the Fed, may decide to keep interest rates high to lower inflation. Thus, from year to year, interest rates may be above (or below) the long-term growth rate of the economy. But over time, interest rates within the total weighted cost of capital should normalize to the growth rate of the economy.

 

[JWBooth]

That way we can encourage debt and discourage savings forever and ever
Hallelujah! Hallelujah!

 

[Toro]

That's a way, way, way different argument than we should have free money until the sun turns into a Supernova.

I'm a bit confused s to your position. How long do you think a policy of zero or negative real interest rates should last? Or do you think such a policy is a bad idea period?

If you accept the Hansen/Summers conjecture of secular stagnation, the situation would endure for decades if not indefinitely (Hansen tied it to demographic trends). If the Wicksellian "natural" rate of interest is negative, how long does it take to change?

I don't know how long ZIRP should last. I don't accept secular stagnation, though maybe I'm wrong.

Economic growth is equal to productivity growth plus population growth over time. If the population is declining, then interest rates should be lower. If productivity growth is also declining - and there may be some evidence that this is the case - then economic growth should also be lower. If economic growth is negative, then interest rates should also be negative.

But the population of the United States is not declining. Nor is productivity growth negative (though productivity growth may be lower than in the past). Thus, interest rates shouldn't be negative over the long term.

Maybe rates should be zero in the short term to wipe away the excess supply, which we have effectively done in the housing market, the manifestation of the financial crisis. However, there is a cost. IMHO, the "cost" of the Fed's actions fueled the Tech Bubble and was directly responsible for the Housing Bubble. Today, the cost is that ZIRP punishes those who live on a fixed income - like my parents, for example - and those with fixed actuarial liabilities, i.e. pension funds, insurance companies. It rewards borrowers. It punishes the prudent and rewards the reckless. It alters risk preferences, driving those further out on the risk curve than they otherwise would be. If ZIRP fails, it could wind up hurting very vulnerable people who rely on assets to fund their lifestyles and who cannot afford permanent damage to their savings.

 

[Kimura]

I get why the funds rate is at zero now. I don't know if it will work long term. Maybe, maybe not. I don't know.

But if capital is continuously mispriced, then distortions arise in the economy. When capital is mispriced, poor capital allocation decisions are made. Pinning the front end at 0% until the end of time will continue this bubble/bust cycle for as long. The perverse effect will be, at least to some extent, more and more resources devoted to financial speculation, at least until the system comes crashing down and we replace the dollar with something else.

This is typical business cycle theory which I disagree with on multiple levels. I'd
be happy to start a separate thread on this discussion if you're game. I reject the business cycle as a Minskyite.

Secondly, if the dollar is replaced as a reserve currency, the impact will have a negligible effect on our lives.Literally.

Capital is not immune from the laws of supply and demand. If priced improperly, it will create distortions and dislocations. We've had two massive bubbles over the past 15 years because of this.

And when I mean "replace the dollar," I mean we, the United States, use another American currency, the dollar 2.0 or whatever. Most currencies that existed 150 years ago aren't in existence today. Currencies exist only because the people have confidence in it. If Americans lose confidence in the dollar, it would cease being a functional currency. Pinning the funds rate at zero forever would increase the odds of an internal dollar collapse immensely.

Financial instability is built into the system. Also, lenders, borrowers and regulators get complacent when asset prices start to increase.

When there is market exuberance, and there is $$$$ available for investment, investors will move from relatively safe investments to risky speculation and schemes. During the recent market collapse, investors tried to increase returns by extreme leveraging and debt financing. We also had all this financial engineering bullshit which enabled complex secularization schemes for various types of asset classes. The most notable being subprime lending. These new financial instruments created the illusion of low to negligible risk, and this was magnified by the complicity of the rating agencies.

 

[oldfart]

Economic growth is equal to productivity growth plus population growth over time.

That's true in a model where labor is the only independent variable. All other factors (physical capital, human capital, technology, social organization) act through labor productivity. It's more common to use a multi-variant input model where each factor has a partial differential with respect to the production function (marginal productivity of each factor). Economic growth then becomes the sum of the products of the growth rate of each factor times its marginal productivity.

If the population is declining, then interest rates should be lower. If productivity growth is also declining - and there may be some evidence that this is the case - then economic growth should also be lower. If economic growth is negative, then interest rates should also be negative.

I have a problem here, the last sentence. Why must interest rates track economic growth? Suppose that technological advance lowers the cost of record storage, reducing cost across virtually all sectors. If all other marginal productivities remain the same, as do all other input levels, output should increase by some measure of more efficient record storage. Realistically this improved technology would be incorporated in physical capital and old equipment would have to be replaced with new, slightly raising the level of capital investment; but I fail to see how such an effect would move interest rates. Am I missing something?

But the population of the United States is not declining. Nor is productivity growth negative (though productivity growth may be lower than in the past). Thus, interest rates shouldn't be negative over the long term.

Hansen's argument comes from looking at equilibrium rates of real interest. The demand side of borrowed funds is the expected rate of return on new investment. With sufficient excess capacity, this could easily be zero or negative until the economy expands to a level that excess capacity is reduced. The supply side is the desire of savers (households and businesses) to defer spending to the future. Quantity supplied and quantity demanded are made equal at the equilibrium interest rate. If everyone wants to pay down debt, and no one wants to borrow, the real interest rate would be negative until the situation changes. We could quibble about the definition of long run, for physical capital eventually wears out or becomes obsolete, human capital must be replaced as workers age and die, and social overhead deteriorates if not maintained. So demand will eventually recover. But a la Hansen, it could take decades.

Maybe rates should be zero in the short term to wipe away the excess supply, which we have effectively done in the housing market, the manifestation of the financial crisis. However, there is a cost. IMHO, the "cost" of the Fed's actions fueled the Tech Bubble and was directly responsible for the Housing Bubble.

As I previously argued, bubbles are inherent in market economies and there is no effective way to prevent them through monetary policy without destroying the economy. The Fed tried to in 1928 and look how well that worked out! The best mitigation tools IMHO are regulatory as they can be targeted whereas manipulating interest rates and monetary base are too broad. Think what would have happened if bank regulators required income verification from the IRS and a minimum 5% down payment on all mortgages beginning in 2004 or so.

Today, the cost is that ZIRP punishes those who live on a fixed income - like my parents, for example - and those with fixed actuarial liabilities, i.e. pension funds, insurance companies. It rewards borrowers. It punishes the prudent and rewards the reckless. It alters risk preferences, driving those further out on the risk curve than they otherwise would be. If ZIRP fails, it could wind up hurting very vulnerable people who rely on assets to fund their lifestyles and who cannot afford permanent damage to their savings.

I agree with you here, with the caveat that there are ways to reduce perverse incentives in financial institutions which result in excessive risk taking and ways to encourage and protect small savers. Financial institutions can be forced into immediate resolution rather than be allowed to linger or be bailed out as they are now. The TIPS program can be expanded and tax credits given for small savers.

So, what will we talk about next? Solving global warming?

 

[expat_panama]

Financial instability ... ...borrowers and regulators get complacent ... ...move from relatively safe investments to risky speculation and schemes.

OK, so there was more to it in the original post but where are we going here? Sure, I'd be the first to agree that mindless complaining can be a lot of fun but eventually we need to get to work. Like, this thread vaguely sounds like someone's advocating replacing fed policy with zero interest rates by fiat, and it also sounds like no body wants to spell out a specific position. Here's an example of what a position looks like:

Let the fed continue with stable prices. The problem's social and fiscal, not monetary so we need to restore economic growth though tax'n'spending cutbacks plus increased market freedom from central control.

If anyone here has a different direction they want then they can say it; getting into the nuts'n'bolts of monetary and fiscal policy is key, but the first step is always deciding what we want.

 

[oldfart]

Financial instability ... ...borrowers and regulators get complacent ... ...move from relatively safe investments to risky speculation and schemes.

OK, so there was more to it in the original post but where are we going here? Sure, I'd be the first to agree that mindless complaining can be a lot of fun but eventually we need to get to work. Like, this thread vaguely sounds like someone's advocating replacing fed policy with zero interest rates by fiat, and it also sounds like no body wants to spell out a specific position. Here's an example of what a position looks like:

Let the fed continue with stable prices. The problem's social and fiscal, not monetary so we need to restore economic growth though tax'n'spending cutbacks plus increased market freedom from central control.

If anyone here has a different direction they want then they can say it; getting into the nuts'n'bolts of monetary and fiscal policy is key, but the first step is always deciding what we want.

OK, I think the policy you highlighted would result in disaster. Here's my alternative:

1. The Fed should commit for a period of years to a policy of moderate inflation (3--4%) in order to achieve negative real interest rates on the order of 2% or so.

2. Regulatory reform of the financial industry should focus on ending bailouts, speedy and complete resolution of failing institutions, and vigorous criminal enforcement of securities fraud, anti-trust, and related laws.

3. Corporate governance should change so that only outside directors can determine executive compensation, financial intermediaries cannot vote their common stock, and all boards must have public and labor members.

4. We should adopt Marty Feldstein's program of an additional trillion dollars of infrastructure renewal over five years.

5. The minimum wage should be replaced by a program of guaranteed employment at or above the poverty level.

6. Defense spending, intelligence spending, and homeland security should be slashed in half. SWAT teams should be reduced by at least 90%, stopping the militarization of law enforcement, and forfeiture laws repealed.

7. Social security benefits should be increased by 25% and the upper limit on OASDI wages eliminated.

8. Government support for basic research should be quintupled.

9. Non-profit status should be abolished and replaced with a deduction for certain charitable activities. All lobbying and political activities should be treated as UBI.

10. The corporate income tax should be abolished and with it all corporate tax breaks. Preferential tax treatment for dividends and capital gains should be eliminated. A tax on corporate accumulations (Black Motors formula) should be instituted.

 

[Kimura]

Financial instability ... ...borrowers and regulators get complacent ... ...move from relatively safe investments to risky speculation and schemes.

OK, so there was more to it in the original post but where are we going here? Sure, I'd be the first to agree that mindless complaining can be a lot of fun but eventually we need to get to work. Like, this thread vaguely sounds like someone's advocating replacing fed policy with zero interest rates by fiat, and it also sounds like no body wants to spell out a specific position. Here's an example of what a position looks like:

Let the fed continue with stable prices. The problem's social and fiscal, not monetary so we need to restore economic growth though tax'n'spending cutbacks plus increased market freedom from central control.

If anyone here has a different direction they want then they can say it; getting into the nuts'n'bolts of monetary and fiscal policy is key, but the first step is always deciding what we want.

The natural rate of interest is zero. I still maintain this position. Unless the Treasury steps in to maintain a positive base rate through bond issuance, deficits, in and of themselves, imply a base rate of zero. The FED directly controls short-term interest rates under our fiat system, and there are many valid reasons for setting the overnight rate to zero, which would allow for markets to factor in risk for credit spreads.

The Japanese situation has already demonstrated that this will not result in devaluation or inflation. In point of fact, low rates support growth, productivity, and investments. If rates change, for the most part, they only have micro effects, which can increase employment and output, because it moves aggregate income from savers to working people. The macro effect is zero, because for every dollar which is borrowed in the banking system, there is a dollar saved so to speak.

 

[CrusaderFrank]

I get why the funds rate is at zero now. I don't know if it will work long term. Maybe, maybe not. I don't know.

But if capital is continuously mispriced, then distortions arise in the economy. When capital is mispriced, poor capital allocation decisions are made. Pinning the front end at 0% until the end of time will continue this bubble/bust cycle for as long. The perverse effect will be, at least to some extent, more and more resources devoted to financial speculation, at least until the system comes crashing down and we replace the dollar with something else.

This is typical business cycle theory which I disagree with on multiple levels. I'd
be happy to start a separate thread on this discussion if you're game. I reject the business cycle as a Minskyite.

Secondly, if the dollar is replaced as a reserve currency, the impact will have a negligible effect on our lives.Literally.

Capital is not immune from the laws of supply and demand. If priced improperly, it will create distortions and dislocations. We've had two massive bubbles over the past 15 years because of this.

And when I mean "replace the dollar," I mean we, the United States, use another American currency, the dollar 2.0 or whatever. Most currencies that existed 150 years ago aren't in existence today. Currencies exist only because the people have confidence in it. If Americans lose confidence in the dollar, it would cease being a functional currency. Pinning the funds rate at zero forever would increase the odds of an internal dollar collapse immensely.

I think that's the Game Plan because it sure as fuck isn't helping the US Economy

 

[Norman]

Financial instability ... ...borrowers and regulators get complacent ... ...move from relatively safe investments to risky speculation and schemes.

OK, so there was more to it in the original post but where are we going here? Sure, I'd be the first to agree that mindless complaining can be a lot of fun but eventually we need to get to work. Like, this thread vaguely sounds like someone's advocating replacing fed policy with zero interest rates by fiat, and it also sounds like no body wants to spell out a specific position. Here's an example of what a position looks like:

Let the fed continue with stable prices. The problem's social and fiscal, not monetary so we need to restore economic growth though tax'n'spending cutbacks plus increased market freedom from central control.

If anyone here has a different direction they want then they can say it; getting into the nuts'n'bolts of monetary and fiscal policy is key, but the first step is always deciding what we want.

The natural rate of interest is zero. I still maintain this position. Unless the Treasury steps in to maintain a positive base rate through bond issuance, deficits, in and of themselves, imply a base rate of zero. The FED directly controls short-term interest rates under our fiat system, and there are many valid reasons for setting the overnight rate to zero, which would allow for markets to factor in risk for credit spreads.

The Japanese situation has already demonstrated that this will not result in devaluation or inflation. In point of fact, low rates support growth, productivity, and investments. If rates change, for the most part, they only have micro effects, which can increase employment and output, because it moves aggregate income from savers to working people. The macro effect is zero, because for every dollar which is borrowed in the banking system, there is a dollar saved so to speak.

Could you explain how do you define this "natural interest rate"?

As for 0% interest rates not causing inflation. Well I guess that would depend, but it certainly causes more inflation than higher rates (assuming that the production remains the same, which is a fair assumption in the long run). And that means you can't do as much open market operations. I am not sure whether I would like the banks or the government to have this printed money.

 

[Toro]

If "the natural rate" of interest is 0%, then the market will take it to 0%. Government pinning a 0% rate isn't natural.

 

[Kimura]

OK, so there was more to it in the original post but where are we going here? Sure, I'd be the first to agree that mindless complaining can be a lot of fun but eventually we need to get to work. Like, this thread vaguely sounds like someone's advocating replacing fed policy with zero interest rates by fiat, and it also sounds like no body wants to spell out a specific position. Here's an example of what a position looks like: If anyone here has a different direction they want then they can say it; getting into the nuts'n'bolts of monetary and fiscal policy is key, but the first step is always deciding what we want.

The natural rate of interest is zero. I still maintain this position. Unless the Treasury steps in to maintain a positive base rate through bond issuance, deficits, in and of themselves, imply a base rate of zero. The FED directly controls short-term interest rates under our fiat system, and there are many valid reasons for setting the overnight rate to zero, which would allow for markets to factor in risk for credit spreads.

The Japanese situation has already demonstrated that this will not result in devaluation or inflation. In point of fact, low rates support growth, productivity, and investments. If rates change, for the most part, they only have micro effects, which can increase employment and output, because it moves aggregate income from savers to working people. The macro effect is zero, because for every dollar which is borrowed in the banking system, there is a dollar saved so to speak.

Could you explain how do you define this "natural interest rate"?

As for 0% interest rates not causing inflation. Well I guess that would depend, but it certainly causes more inflation than higher rates (assuming that the production remains the same, which is a fair assumption in the long run). And that means you can't do as much open market operations. I am not sure whether I would like the banks or the government to have this printed money.

The size of deficits should be viewed from the desirability of the non-government sector to net save in dollars. If the deficit is too small, and unemployment increase, we know that spending wasn’t sufficient to cover the spending gap.

Deficits add to bank reserves and result in reserve surpluses within the banking system. The excess reserves will result in competition in the interbank market for banks looking for better returns than the FED can offer.

It would be more logical not provide for a support rate at all. Under this scenario, net spending will shift the overnight rate to zero since interbank competition can’t remove the surpluses in the banking system. All of these transactions would net to zero, and there wouldn’t any destruction of net financial assets.

If we consider full employment as part of the natural setting, fiscal policy will shift the short-terms interest rates to zero. In the even the FED desires a positive short term rate, it would have two options in its policy tool box: drain the excess reserves by issuing bonds or offer a substantially better rate of return on excess reserves.
Personally, I rather zero rates and no bonds sales. The would put fiscal policy in the driver’s seat where it belongs.

In terms of inflation, $$$$ creation, simply doesn’t result in inflation. Spending, taken in isolation, cannot cause inflation. A continuous rise in the price level is a result of demand outpacing the capacity of the economy to expand through increased production. The only way for this to occur is if government spending outpaces the desire of the non-government sector to save at close to full employment. You then end up in a scenario where energy, materials, and labor are bid up. We can also see inflation result from supply shocks.

We can never prognosticate about inflation by simply looking at $$$$ creation/government spending apart from demand as it pertains to supply.

 

[Kimura]

If "the natural rate" of interest is 0%, then the market will take it to 0%. Government pinning a 0% rate isn't natural.

The FED controls interest rates all along the term structure. It boils down to how the FED wants to manage yields. This seems perfectly natural under a floating fx.

 

[Toro]

If "the natural rate" of interest is 0%, then the market will take it to 0%. Government pinning a 0% rate isn't natural.

The FED controls interest rates all along the term structure. It boils down to how the FED wants to manage yields. This seems perfectly natural under a floating fx.

The Fed influences rates on the long end. They don't control them.

And the ability to influence the long end is related to investors' confidence in the central bank.

 

[Toro]

Bill Gross is on CNBC saying the Fed is manipulating asset prices, and PIMCO remains skeptical of the Fed's strategy.

Dow up 160. Hooray for money printing!

 

[TakeAStepBack]

And 10 billion a month reduction in QE buying starting in January. Not that it relates directly to interest rates...or does it.