Will you recognize me?
Call my name, or walk on by?
Rain keeps falling, rain keeps falling
Down, down, down, down
--Simple Minds
The Fed has suppressed short term borrowing rates to zero. It is buying $90 billion monthly in Treasuries. It has said it supports policies that pushes financial asset prices higher.
In this environment of financial repression, how much is too much to pay for a yield bearing security?
Stated differently, how distorted can discounting mechanisms get in this environment?
position in SPX, Treasuries
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1 comment:
There is the possibility ... that, after the rate of interest has fallen to a certain level, liquidity-preference may become virtually absolute in the sense that almost everyone prefers cash to holding a debt which yields so low a rate of interest. In this event the monetary authority would have lost effective control over the rate of interest.
~John Maynard Keynes
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