Joe Weisenthal: Paul Ryan Is Wrong About Why Interest Rates Are So Low


In a recent speech, Bernanke revealed the real reason for ultra low rates.

The rate on the 10-year bond can be broken down into 3 factors.

One is expected inflation. One is the expectations of the path of short-term interest rates (which the fed does control). And the other factor is term premium, how much compensation investors demand to buy longer-term debt.

As this Bernanke chart makes clear. Inflation expectations are muted. There is expectation of the Fed keeping short rates low for a long time. And actually term premium is negative, reflecting desire to hold Treasuries as a hedge.

The actual Fed QE is not the story here.

interest rates

Ben Bernanke, Federal Reserve

Watch & Learn: What Short Selling Really Means

 

Paul Ryan Is Wrong About Why Interest Rates Are So Low – Business Insider
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