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Economic Review

10/19/2009

So far the new millennium has involved nearly a decade of pathetic monetary policy strategy and asset bubbles...

If you think that things haven’t changed much over the past decade, you may be correct on the big picture.  What that scenario depicts is a creation of an asset bubble with near zero and often negative real interest rate monetary policy.  The pricking of that asset bubble with only a mild increase in short term rates , as gross dis-equilibriums (the past real estate situation) were getting out of control and finally a rebuilding of asset bubbles with zero interest rate policies again. 

The private consumer who adheres to traditional and sound investment strategies (especially senior citizens) have been simply rocked in terms of lack of return in shorter dated interest bearing products.  Despite the fact that inflation has been on the rise consistently over this past decade (which is very likely being understated) short term interest rates for many years barely breached 1%.  As a result, many investors have been almost forced into the Equity side of the markets to achieve some sort of solid return.  However, this has been a problem, given that the Dow Jones was actually about 10% higher at the beginning of the new millennium as it is now.

Investor options for the moderately fiscal minded individual now?  Grab those (.25%) 3 month rates or get into that exuberant stock market…doesn’t it feel like a broken record?

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