“Radical monetary policy begets more radical policy,” says James Grant. “It seems to me at some point markets or voters will put a stop to this.”
In the current low-rate environment, there is reason to wonder about the viability of banks, insurance companies, and indeed any institution that generally depends on the spread between long- and short-dated liabilities for its profits, says David Schawel, CFA.
Jason Voss, CFA, provides his choices for Weekend Reads for Investors. This edition discusses the decline of US productivity, the little-known but important Sykes-Picot Agreement, and sleeping trees.
Recent events have challenged traditional economic theory about low (and negative) interest rates. Is it a brief aberration or the beginning of an unfamiliar and potentially treacherous new normal?
European Central Bank President Mario Draghi surprised many last week by reducing the interest rate on deposits to a negative level (−10 bps). So, we asked readers whether negative rates would discourage banks from keeping deposits at the ECB or whether banks might prefer to pay a premium for safety.
Can anyone reasonably expect to earn a 5% real return with acceptable risk in today’s economic environment?
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