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Hmm, some low effort comments here. Here's a different perspective (fully admitting that I only read the headline, it seems to be paywalled): I think the causality is reversed here. Low interest rates are a mere symptom of the lower natural rate of interest (r*). The Fed can do all it wants to the short term interest rates, but the long term rates are ultimately set by the market. 30y treasuries are being traded today for 1.9%. Even if you believe that the Fed is manipulating things in the short end, there's nothing it can do in the long end (well, technically it can carry out QE and buy 30ys and suppress yields, but the WAM of the SOMA[0] has been falling since the COVID crisis, so I don't think that's what's happening here). Okay, so why is the r* low? I personally ascribe it to demographic shifts (older population -> more savings -> savings glut -> capital is cheap -> rates low). Atif Mian and Amir Sufi presented some work at Jackson Hole this weekend that claims that it's all about inequality, not demographics. I'm not entirely convinced just reading the headline result, but it's plausible, and Atif and Amir are serious researchers, so I would give them a non-zero weight in forming your world view. EDIT:
[0] WAM = weighted average maturity
SOMA = Fed's System Open Market Account Basically a shorthanded way of saying that the average maturity of the Fed's holdings are not constant, but rather shortening, indicating that the Fed is not purchasing new 30y paper (at least, not at the same clip) and simply letting the existing debt roll off the books. |