“One of the many consequences of the Fed’s ultra-low interest rates is that US corporations have gorged on credit.  In 2007, at the peak of the last credit bubble, US non-financial corporations had $7.2 trillion in outstanding debt. Today, they owe $9.6 trillion.  The Fed has built up a huge conflict of interest in its own policy making.  If it raises interest rates, it will depress the value of its balance sheet (which is now stuffed full of interest-rate-sensitive long bonds). But if the Fed backs off raising rates, for fear of the effect on bloated credit and stock markets, it risks losing all credibility… especially if the rate of consumer price inflation continues to rise.”

http://bonnerandpartners.com/how-to-handle-the-coming-bond-market-bust/

Did you like this?
Tip Freedomwat.ch Staff with Bitcoin

Donate via Installed Wallet Copy

“Ultra-low rates cause investors to pile into increasingly poor investment choices – overvalued stocks, bonds, real estate, etc.  But ultra-low rates have other, more subtle, effects, too…  As we’ve been reporting, it also makes it extremely easy for corporations to borrow. And as the chart below shows, they’ve been borrowing like crazy recently.  What have they been doing with all this money?  One major source of spending has been share buybacks.  Over the past four years, share buybacks have totaled between $75 billion and $159 billion a quarter.  And in the first quarter of this year they reached a high exceeded only by a couple of quarters in 2007.”

http://bonnerandpartners.com/what-happens-when-share-buybacks-dry-up/

Did you like this?
Tip Freedomwat.ch Staff with Bitcoin

Donate via Installed Wallet Copy