Interest rates will stay low "for a long time", that's the word from Federal Reserve chair Ben Bernanke from a conference just yesterday.
And this move comes as somewhat of a puzzlement to me. Perhaps you remember my piece on PIMCO's dumping of bonds because they foresee a big hike in interest rates in the not too distant future. Well, Sol Nasisi and I got in a bit of a go-round on that score, and indeed, there doesn't seem to be any immediate shortage of buyers for US Treasury issues. Though Sol and I do differ on how long this particular party will last--I say investors are already looking for their coats whilst Sol seems to be of the mind that they're still looking for the punch bowl. But this is where the puzzlement comes in.
Why on earth would Bernanke announce, publicly, to the world that the plan is to offer bare-bones interest rates, and to do so for "a long time"? Does he WANT people to go elsewhere, possibly in a bid to get more of that sideline cash rumbling into the stock market or corporate bonds, like PIMCO's doing? Or does he simply believe that United States treasury issues are SO INCREDIBLY GOOD that they don't need to offer high rates? Maybe he thinks he's got the world over a barrel, and that the United States with its incredibly diverse economy and history as a safe haven, might well be the ONLY safe haven security left!
No one but Bernanke really knows Bernanke's motivations, but something does not bode well about the entire situation and practically screams that something nasty is afoot.