Bernanke in remarks to Congress said that he would keep interest rates real low for the next two years. OK, tell me how? The only way to accomplish that is to buy every bond presented for sale on the resale market at full price. I wouldn’t pay full price for anything in this economy, it is counter intuitive. Every banker in town will queue up to the Federal Reserve to unload their dog eared bonds at full price.
People point to Japan over the last 20 years with super low interest rates, but the real game was obfuscated by international trading. The Japanese people were getting zero interest for their deposits but the country’s bankers were buying US Treasuries. These bonds were paying 7 to 8 percent so in actuality, we were subsidizing the banks in Japan. And by God they were patient, we made them whole over a period of two decades. The interest paid help bail out their failing institutions. They loaned us all of their savings for 20 years and we spent every dime. Of course, that’s another story.
Where do people want to put their money now? If you are super rich, it's in T bills. The money is insured by the full faith and credit of the US government. They are not worried about the return on their money, but the return of their money.
Bernanke has taken risk out of the market, all loans are guaranteed. The one market not under his control is stock market. It's looking a little sick lately. The real world is around here somewhere. Let's click some gold coins together and try to wake up--hopefully not in Kansas.