«We live in a hall of mirrors which our central banks have made for us.»
James Grant, Wall Street expert and editor of the renowned investment newsletter «Grant’s Interest Rate Observer», warns of the unseen consequences of super low interest rate and questions the extraordinary actions of the Swiss National Bank.
Nearly ten years after the financial crisis, extraordinary monetary policy has become the norm. The financial markets seem to like it: Stocks are close to record levels and the global economy is finally picking up. Nonetheless, James Grant sees no reason to sound the all-clear signal. The sharp thinking and highly regarded editor of the iconic Wall Street newsletter «Grant’s Interest Rate Observer» argues that historically low interest rates are distorting the perception of investors. »Principally, Mr. Draghi has robbed the marketplace of essential information», he criticizes the head of the European Central Bank for example. Highly proficient in financial history, Mr. Grant also questions the strategy of the Swiss National Bank. He fears that the voluntary depreciation of the Franc undermines the status of Switzerland as a global financial center.
Mr. Grant, monetary policy remains a primary theme for investors around the globe. What are your thoughts on the state of the financial world?
We live in a hall of mirrors which our central banks have made for us and that hall of mirrors distorts perceptions. That, I think is a big problem.
Why?
Interest rates are prices. In fact, they are the most consequential prices in a market economy because they discount future cash flows and they help us to set investment hurdles and to measure financial risks. In short, interest rates are prices and prices convey information and distorted prices convey misinformation.
…click on the above link to read the rest of the article…
