- Gas Prices Zoom at Record Pace (CNN.com)
- E-Commerce Sales Up 4.6% (CNN.com)
- The Trouble with Low Interest Rates (George Feiger, Milken Review): “The current economic cycle, from internet boom through Enron bust, has been unusually extreme. The Federal REserve has responded as expected, lowering interest rates time and again, in an effort to stimulate demand. These low rates have yet to generate much business investment. But they have made it possible for fiscally challenged corporations and municipalities to issue higher-yielding – and riskier – debt, as Treasury and CD yields have fallen to historic lows. And they have permitted an unprecedented flood of mortgage turnovers by homeowners, who have borrowed hundreds of billions more against their bloated equity to sustain personal consumption. From the perspective of demand management, the overriding priority of the Fed – easy credit – is just what the doctor ordered for recessions. However, returns on bonds, bank CDs and other securities are also a source of income for investors. Indeed, for a minority of relatively affluent retirees, investment returns are the primary source of retirement income. And for them, the last three years have been an unmitigated disaster. A blind scramble for yield by many of them holds the promise of magnifying this disaster still further. More ominous, the fate of this small group threatens to become the fate of much larger numbers of retirees in the next few decades, many of whom are far from affluent. With fewer companies providing pensions of any sort, a far greater proportion of retirees will come to rely on investment returns for their bread and butter. Accordingly, the policy of driving down interest rates to rid the economy of recession could easily come to mean extended periods of financial distress for millions.”
Posted by Mises.org News
