September 26, 2011

Low Interest Rates Are Part Of The Problem, Not Part Of The Solution

From my perspective, the Twist really amounts to another Fed "Hail Mary" pass that will fall short of the end zone. But, by putting the squeeze on banks and further restricting credit availability to small business the move will likely do more harm than good.

The policy rests on the false premise moving already historically low interest rates even lower will stimulate the economy into recovery. But low interest rates are part of the problem, not part of the solution.

Even by the government's debased standards, trailing headline inflation is already hovering above 4 percent, and, at current rates, 30-year Treasuries are negative by 100 basis points. This distortion is inflicting untold damage on the economy. Pushing rates further into negative territory seems only to invite more problems in the future.

Tickers, iShares Barclays 20+ Yr Treas.Bond ETF (NYSE:TLT), ProShares UltraShort 20+ Year Trea ETF (NYSE:TBT)

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.
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