The Funny Money

Low Rates Could Be Around for Long Term
By EDMUND L. ANDREWS
Published: June 27, 2005
http://www.nytimes.com/2005/06/27/business/27fed.html

The Article tries to describe the various theories for low Long-term Interest rates. This Author cannot claim to be a Fed Governor or ex-Fed Governor, but he thinks the rationale for the low Long-term rates results from classic economic principles, not new and exotic properties. A good Poker player will always examine his own 'Hole' card, before betting on the other players' cards.

The American economy still imports more than it exports, with Imports increasing faster than Exports. Outsourcing continues to increase, though American businesses are beginning to bring some of it home, realizing that internal business policy does not vacation well. Real economic investment, except for Housing, seems in short supply. American business since the Reagan era entered into the production of Financial Paper, as well as any Product produced; hereafter known as the 401k Era. This is where We are coming from!

Much of the American Labor force has currently been scrapped to pay a Dividend to the Financial Paper of the 401k Era. Real American economic investment has been in decline, because American Wages cannot pay the Dividend on the Financial Paper of the 401k Era. The Dividend, though, is churning out new funds for Investment. American Corporate stocks and bonds are showing difficulty in maintaining the Dividend for the 401k Era Paper since the American labor has already been laid off, and does not seem like a good investment option. Foreign investment seems risky to many Investors, who eye foreign legal systems with great suspicion. The Holders of the 401k Era Paper are simply dumping investment funds into Long-term Bonds, mortgages, and Treasuries due to lack of alternate investment opportunity. lgl