CNBC and MSNBC contributor Ron Insana warns that plunging interest rates in the U.K., Japan, Germany and U.S. is a serious matter that means frightened investors are essentially dictating central bank monetary policy.
"Japanese 10-year government bonds have fallen more deeply into the red, with a yield of minus 0.17 percent, while 10-year German bunds now sport negative yields for the first time ever," Insana explained. U.S. and U.K. rates are dismally low, lingering in the 1 percent to 2 percent range.
“This not only reflects growing anxiety about economic and political risk, but also most certainly ties the Fed's hands, possibly for much of the rest of the year,” Insana, the author of four books on Wall Street, wrote on CNBC.com.
He explains that negative interest rates simply mean that global investors are so nervous that they are willing to pay governments to lend them money. “This is serious stuff. It's not just a matter of central banks manipulating interest rates downward. Investors are actually leading the central banks in driving down yields,” he said.
“In the U.S., where the economy is relatively stronger than the rest of the world, rates are falling, as well; signaling to the Fed that fear of slow growth, deflation and other risks, far outweigh the fear of inflation and faster growth here at home. Indeed, inflation expectations in the U.S. continue to decline, again, potentially tying the Fed's hands, not just this month, but maybe for months, or even years, to come,” he said.
“That is a global message, too. In the absence of alternative forms of economic stimulus, whether through fiscal or tax policy changes, this is the world that the Fed must deal with.”
Newsmax Finance Insider Axel Merk
wonders if global central banks haven't just set up a ticking financial time-bomb.
"Are we better off with "QE," the ultra-accommodative monetary policy pursued by major central banks around the world? Is it "mission accomplished" or are we facing a "ticking time bomb"? he wrote in a recent blog.
"I leave it up to the reader to decide whether the Fed and other central banks are part of the problem or the solution. However, I would like to caution that investors may not want to rely on the Fed or the government to take care of their financial well-being; they have their own problems cut out for them, as a government in debt may well have their own priorities that run counter to investor interests."
(Newsmax wire services contributed to this report).
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