http://www.oftwominds.com/blog.html
Let us be crystal-clear about the purpose of zero interest rate policy (ZIRP): to destroy all incentives for saving and capital accumulation, and to reward and incentivize borrowing, leverage and speculation. More credit means more debt, which means more fees for Wall Street, more fees and interest payments to the banks, and more taxes to the Savior State. Only the borrowers lose.
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he Fed’s strategy is simple: inflate a new asset bubble by forcing everyone to go long, and go deep. Non-football players, please pardon the football analogy: to go long and deep is to send a receiver far down field in the hopes that a long throw by the quarterback will reach him rather than a defensive player. It is a high-risk play with big rewards– huge gains in yardage or perhaps even a quick touchdown.
By manipulating all markets–stocks, bonds, real estate, you name it–the Fed has made it impossible to “go short”, that is, bet against the market. Every Monday for months on end, the stock market “ramped and camped”–shot up at the open and stayed there all day.
When the stock market rose hundreds of points in these absurd manipulations, the financial media gloated over the “gains” resulting from “the nascent recovery.” Yet when the markets plummet as the air escapes from the “nascent recovery,” then politicos and pundits demand an investigation. Can manipulation be more overt than this?
The Fed effectively nationalized the entire U.S. mortgage market to prop up housing, and the zero interest rate policy actively promoted borrowing to speculate on risky asset plays: there was only one game in town, and only one strategy for earning any yield left: go long, go deep.
