Monday, November 2, 2015

Are rates artificially low?

The effective funds rate is stuck low by regulation of the GSEs. It is not artificial, the US Senate really did do that. But the Fed raised them a bit by offering higher deposit rates.  Did the Fed artificially do that? No, they really did do that.  The Fed also attempted to keep short term bond rate lower. That was a real thing.  So, by gosh and by golly, we got a gap in the monotonary market, and the Fed is bridging that gap. This sounds like a rubber neckers dream come true. The Fed is likely going to walk the maze forever, or until the helicopter drops; whatever comes first.

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