I have written about the dangerous long-term implications of ZIRP and NIRP from large central banks again and again on this Instablog since 2014, so I will keep this one rather short. Bill Gross aptly summarized this in a tweet recently:
Gross: Global yields lowest in 500 years of recorded history. $10 trillion of neg. rate bonds. This is a supernova that will explode one day.
The following mortgage example from Denmark again highlights the absurdity concerning the time value and risk-return associated to artificially low interest rates:
Scandinavia's third-largest economy (the population is 5 million, and there are about as many bikes) is deep into an unprecedented experiment with negative interest rates, a monetary policy tool once viewed by mainstream economists as approaching apostasy, if not a virtual impossibility. Companies-though not yet individuals-are paying lenders for the privilege of keeping funds on deposit; homeowners, in some cases, are actually making money on mortgages.
ZeroHedge picked up on this:
And so we now find that we live in a world where markets are so upside down, that individual borrowers in Denmark have a lower credit risk than the United States government over a thirty year horizon. Don't think about it too long, or blood will start shooting out of your eyes.
www.zerohedge.com/news/2016-06-13/bizzar...
It doesn't take a degree in economics to arrive at the conclusion that this doesn't end well.
Billions and billions around the world are poured into riskier and riskier assets because of all this easy money in dire need to generate returns "somehow".