November 14, 2012

Winners and Losers of the Fed's Low Interest Rates

By Frank Ryan
"Any time you have a really great deal, remember: for every winner, there must be a loser." The expression means that when you have a lopsided transaction, one person's good deal is likely struck at another's expense.    With the artificially low interest rates promoted by the Federal Reserve with Quantitative Easing and Operation Twist, there are winners and losers as well.  By the Fed's own admission, the purpose of the current monetary policy is to significantly reduce long-term rates of interest to stimulate the economy. The Federal Reserve's monetary easing is designed to stimulate the economy while at the same time keeping inflation in check.  The fallacy of the policy, however, becomes apparent when one considers who loses financially as a result of monetary easing.  Federal Reserve policy papers typically consider the effects on only those who benefit from the policies.  Those who are negatively affected by the Federal Reserve monetary-easing hold...(Read Full Article)