posted by gut
LMFAO. A quarter of a century? Are you being deliberately obtuse or willfully ignorant?
Again, it's hard to argue with you when you have absolutely no idea what you're talking about. Are you actually attempting to argue higher historical rates were the result of govt intervention? You're familiar with Paul Volker, correct? You do realilze it's a pretty common view (among economists and people who actually study and know these things) that easy money (a.k.a artificially low rates) was a major factor in the internet and housing bubbles, which destroyed tremendous wealth and triggered significant recessions..
The quarter of a century reference was my suggestion that even in the future as rates remain low - and they will - you'll continue to say they're artificially low. The question becomes at what point do we decide that there's nothing "artificial" about the lowness? How long can something go on "artificially" before people concede that there's nothing "Artificial" going on. It was also a reference to the Japanese who HAVE had rates that low for that long. There's nothing more or less "artificial" about high rates or low rates - in all cases they derive from the market's expectations regarding the behavior of the sovereign monetary authority - aka government intervention and policy.
And yes I'm familiar with Paul Volcker and my God if you don't realize that the Federal Reserve setting higher short term interest rates raises them across the yield curve IS GOVERNMENT INTERVENTION and IS what ultimately resulted in higher interest rates across the yield curve in the past. The Federal Reserve intervening federal funds market and the expectations therefrom in the markets are what drive interest rates in the economy. There is not and has never been anything "natural" about this process. It all derives from government policy choices.
I'm aware that there is a contingent that thinks the Fed kept rates too low for too long and I happen to disagree that this was a primary cause of the great recession. As Milton Friedman argued - lower interest rates result when money has been too tight to get the economy going adequately enough to allow the monetary authority to allow higher interest rates w/o recession.
Here's an article about Ben Bernanke making this same point while referencing Milton Friedman:
http://www.businessinsider.com/bernanke-on-milton-friedman--milton-friedman-on-the-fed-today-2012-10
His answer was excellent. He pointed out that Friedman advocated QE for Japan during its struggle against deflation and weak growth. He also recalled one of Friedman's most important lessons, that low interest rates are not the same as loose policy.
This point — and again this goes back to Evans this morning — can best be grasped by thinking about the '70s inflation, when rates were high. Surely nobody thought those high rates were an indication of overly tight money. Ultra-low rates are evidence that money is still too tight, since it means monetary policy is failing to induce the desired inflation.
Kind of funny if you ask me that your views are more in line with Obama's terrible Fed Appointee Jeremy "Bubble-Popping" Stein and mine are more in line with Bernanke and Friedman.