We're told regularly that, at some point, Quantitative Easing will end and interest rates will rise. Zero Hedge provides a window as to why this is unlikely to occur in any meaningful way.
It's not uncommon to hear Fed officials and politicians deny that we are monetizing debt. Technically, we are not. We issue debt, the debt gets purchased, and the Fed (which is essentially a private institution, though it's really a quasi-governmental institution) buys it back. Normally government debt is held by the public, which is why economic analysis of the old "crowding out" problem was so prevalent.
By keeping interest rates low, and repurchasing debt, the appearance of private ownership is maintained, but it is a roundabout method of monetizing debt. Allowing rates to rise to any meaningful degree will have severe negative impacts, in the short term. Since we are in a politically driven economy, this cannot be allowed to occur, so interest rates must remain artificially low.
Of course, the long term ramifications of monetizing debt are inflation (followed by deflation) and severe misallocation of economic resources. In other words, bankruptcies, unemployment and a financial morass. Not to mention the end of an expectation of comfortable retirement (how can you retire on a fixed income if interest rates are below 1%?).
Don't expect interest rates to move up any time soon, and don't expect any reporting of realistic inflation. Just vote for the guy/gal who will shovel the most tax money toward you.
