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Added to the reasons why Fed policies are counterproductive is companies spending billions to...

Added to the reasons why Fed policies are counterproductive is companies spending billions to buck up their pension schemes thanks to barely visible interest rates. It's simple math - as rates fall, liabilities rise, and companies must add funds. Ford will spend $5B shoring up its pensions this year, about as much as spent building plants last year.
Comments (17)
  • lithgowk
    , contributor
    Comments (7) | Send Message
     
    The government wants banks to lend money so employers increase their hiring, but employers are busy adding to their pension funds instead. Increasing savings is seen as a non-productive use of funds, but low interest rates is causing billions to go into savings. Low interest rates is not doing anything noticeable to increase employment, but it does shrink the income of savers, colleges, endowments and pension plans. Low interest rates also makes it possible for the federal government to borrow at low cost, something I think is the real reason why the feds keep the rates low.
    4 Feb 2013, 08:05 AM Reply Like
  • bbro
    , contributor
    Comments (9597) | Send Message
     
    Low borrowing rates are counterproductive for companies???
    Baa yields are near a 47 year low...too much anti Fed obsession makes Johnny forget some important facts....
    4 Feb 2013, 08:17 AM Reply Like
  • Tack
    , contributor
    Comments (13191) | Send Message
     
    Only 11 of the Fortune-100 companies offer defined-benefit plans. Under defined-contribution plans, the companies could not care less what the interest rates may be, as far as pension commitments are concerned.

     

    This issue is actually of greater concern for government entities, which have made benefit promises to employees, detached from investment-return realities.
    4 Feb 2013, 08:28 AM Reply Like
  • Michael Clark
    , contributor
    Comments (8657) | Send Message
     
    Are you still defending, Bernanke, Tack? I know we agree that interest rates need to rise. Do you still believe that?
    4 Feb 2013, 03:02 PM Reply Like
  • Tack
    , contributor
    Comments (13191) | Send Message
     
    MC:

     

    I am of the same mind I have always been: 1) TARP was critical and well executed 2) ZIRP may have been a logical follow-on, but perpetuation of endlessly-low rates is counterproductive to monetary velocity.
    4 Feb 2013, 06:53 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9032) | Send Message
     
    I am not sure I agree. To get higher monetary velocity what we need is not higher rates. We need higher inflation.
    4 Feb 2013, 09:37 PM Reply Like
  • zorro2828
    , contributor
    Comments (565) | Send Message
     
    I'm not a fan of the unlimited piggybank .. the dilute effect on the dollar or the notion that nominal savings rates are increasing when banks are offering nothing for deposits.. Anyone, not in the equity markets or the Corporate Bond market is making too little on their savings and real growth is stagnant.. January, the markets were up almost 6% ? and what is the going rate on GIC's? Go to the market is Ben's message meantme, pension bunds that are skewed towards bonds.. are suffering a HUGE shortfall.. Buy American, Buy Dividends, Buy Growth and invest in companies
    4 Feb 2013, 08:34 AM Reply Like
  • BlueOkie
    , contributor
    Comments (5008) | Send Message
     
    The FED only cares about inflation and unemployment rates. If you work and want to save, too bad! If you want to retire on your savings too bad!
    4 Feb 2013, 09:04 AM Reply Like
  • minecanary
    , contributor
    Comments (446) | Send Message
     
    If the value of the pension funds - not just the interest made on them -is sucking wind now, wait until the QE insanity ends and rates tick up. When the bond prices crater, it will be just a storyline in the armegeddon that sets in.
    4 Feb 2013, 10:15 AM Reply Like
  • anonymous#12
    , contributor
    Comments (552) | Send Message
     
    "just a storyline in the armegeddon that sets in"

     

    Oh man I was afraid of Y2K and I thought the world was going to end...

     

    Then it was the Solar Flares in 2003....

     

    Then it was the 2008 crisis, where everyone was going to be without a job...

     

    Then on December 21 it market the end of the world.....

     

    So now, when is the Armageddon set in, so I can panic again while the cunning make money?
    4 Feb 2013, 10:51 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9032) | Send Message
     
    You forgot the killer bees.
    4 Feb 2013, 11:29 AM Reply Like
  • Michael Clark
    , contributor
    Comments (8657) | Send Message
     
    Real Armageddon's have occurred. When Nazi Germany invaded Poland. When America dropped the A-bomb on Japan. When Cambodian Maoists began evacuating Cambodians from their city. When Japan attacked Pearl Harbor. 2008.

     

    Japan's Nikkei average is down 88% from its 1989 Housing Bubble Top: 24 years later. There's a very good possibility that's where the whole world is going.
    4 Feb 2013, 03:02 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9032) | Send Message
     
    Don't forget killer bees.
    4 Feb 2013, 09:33 PM Reply Like
  • minecanary
    , contributor
    Comments (446) | Send Message
     
    Back then you didn't have Benny crapping his pants everytime the market fell a few hundred points....and the Fed balance sheet wasn't 4 trill. Nobody is arguing that a subset of scumbags haven't made a killing by being on the receiving end of the Bernak's largesse.
    4 Feb 2013, 11:49 AM Reply Like
  • gmeyers
    , contributor
    Comment (1) | Send Message
     
    If the federal government keeps rates low so they can borrow more easily, I assume that Ford can also borrow more cheaply to build a new plant if they want to build one.
    5 Feb 2013, 07:22 AM Reply Like
  • Speedy5251
    , contributor
    Comment (1) | Send Message
     
    Maybe the problem is asset allocation not just low interest rates. After all they are not a surprise.
    5 Feb 2013, 07:23 AM Reply Like
  • BlueOkie
    , contributor
    Comments (5008) | Send Message
     
    Banks borrow zero cost money from Fed. Then buy T-Bills with the money at under 2% risk free. Why lend it to the free market and take risk?
    8 Feb 2013, 09:42 AM Reply Like
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