Wednesday, May 20, 2020

The downside of low interest rates

Columnist Jeff Sommer published a piece called, "Dealing With the Dark Side of Low Interest Rates" in the May 17 edition of the New York Times. Mr. Sommer’s take is refreshing.  Monetary Doves and Pols on both sides of the aisle ignore the ill effects of low interest rates on conservative investors and senior citizens who receive abysmally low returns from their fixed income investments.  

Mr. Sommer points out that in an ultra low rate world, retirees and those approaching retirement, are left with three poor choices... 

“Live on less, dip deeply into savings or take on more risk…”. 

A steady trough of cheap money and easy credit induces bad decisions that impact all of us.  As mentioned in this space over five years ago, a perennial ultra-low rate environment coupled with lax credit standards, was one of the factors that enabled the masses to over leverage and buy homes they couldn't afford before the housing bubble burst.  
Business vector created by dooder - www.freepik.com

We hear much about the economic benefits of low interest rates including increased capital investment and consumer spending; but there's also a down side.  

Asset bubbles and inflationary pressures strike us all when the cost of credit stays too low, too long.  Yet, it's still easy to find pundits and politicians who always advocate for lower interest rates.  Cheap money.  Who's not for that?

As for the once unthinkable prospect of the FOMC taking short terms rates below zero (a scenario also cited in Sommer's column); it was comforting last week to hear Fed Chairman Powell publicly tamp down the likelihood.  

Saturday, March 28, 2020

The public courtesy award goes to Ricky Gervais

A few winners at the Golden Globe Awards on January 5th decided to sermonize the public, even after host Ricky Gervais admonished them not to do so.

Freepik image 
The majority of us don't tune in to the Golden Globes to watch Stars advocate for a cause celebre.  It's not a free speech issue; it's a public courtesy issue.  Want to speak out about Abortion?  How about Gun Rights or Gun Control?  OK; but please choose an appropriate forum.  By the way, actor Charlton Heston did that in 2012 but he made his Gun Rights remarks at an NRA convention, not the Golden Globe Awards.  Big difference.

There's no shortage of outlets to express one's political opinions on one's own time and Golden Globe Award viewers deserve to hear from invited artists; not crusaders.

Mr. Gervais is an intellectually-honest Progressive who was speaking to his peers that evening because some of them insist on pontificating about matters having nothing to do with their work.  He told them...

"So, if you do win an award tonight; don't use it as a platform to make a political speech."  Then he added...."you’re in no position to lecture the public about anything,"  Bravo.