Helicopter Ben Says: Interest Rates Stay Low

Ben Bernanke himself is saying that interest rates will stay low for the immediate future--but why announce such a move?

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.

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  • Shorebreak

    April 16, 2010

    Ben is there to tell the markets exactly what they want to hear in order to keep the bubble rally going. Merely a hint by Bernanke that rates are going up would cause a sell-off. He wants to wait until the Dow gets back to the 14,000 range, at least, before the easing is pulled-back. Then nothing dramatic is to be expected, maybe a mere quarter point here and there, dragged out over an "extended period". PIMCO is jumping the gun, it appears, unless something unexpected occurs.

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